Plain packaging on tobacco products mean Trade Marks go up in smoke
Last year the UK Government required all tobacco products to be sold in plain packaging, but allowed some time to exhaust existing products in the market place. That time has now expired so henceforth all cigarettes sold in the UK will be in plain packaging. Plain packaging for cigarettes was first introduced in Australia in 2012, and has since been much discussed in the trade mark legal community.
What is plain packaging?
The picture is an example of what all packets of cigarettes will look like in the UK now. In particular:
- The grey-green colour which is thought to be the ‘ugliest colour in the world’
- The health warning must cover at least 65% of the packaging
- The brand name must meet size criteria and be in a plain font
- The variant of the brand is positioned below and in smaller plain print
- There must be no references to descriptions of the product, eg ‘low tar’ or ‘organic’
- There are other restrictions but these are not related to the branding so are not discussed here.
- The thinking behind the plain packaging is that it will make smoking less attractive, particularly to young people.
The function of a trade mark is to differentiate the goods/services of one organization from those of others. Trade marks come in many varieties, not just words or logos. The get up and branding plays a big part in this. Trade marks facilitate consumer choice and provide an assurance as to source and quality. It is what we use to discuss products and recommend them to our friends, or to avoid repeating a bad experience.
Trade marks are the repository of the goodwill in a business, that is they represent the value of the company. It is thought that about 85% of the value of the NIKE company lies in its trade mark. The same product sold without the NIKE mark(s) would not be able to realise the same price – consumers want the genuine article and are prepared to pay more for it – it is the branding which tells them that it is genuine. This also makes counterfeiting lucrative. A counterfeit without the branding is just another competitor!
A significant proportion of goods seized by EU customs authorities are cigarettes. Plain packaging will make it easier to copy packaging (and to use the same format just changing the brand/variant for other products), and will make it more difficult to identify the counterfeits, not just by the enforcers but also by the manufacturers themselves who have to confirm to Customs that the products seized are indeed counterfeits.
The trade mark profession has identified some of the potential problems which could arise as a result of plain packaging legislation, namely:
- This makes it harder to tell which manufacturer the product comes from
- It makes it harder to tell the difference between the different products offered by the same manufacturer
- It makes it more likely that a consumer will buy the wrong product by mistake
- It makes it harder to distinguish a counterfeit from the genuine article
- It makes it harder to add and earn consumer value from their products
- It will be more difficult to explain the differences between products (how can cigatette manufacturers indicate a ‘low tar’ product under the present regime?)
- It will discourage investment in the development of new products because these are more difficult to introduce to consumers, and therefore more difficult to get a return on that investment.
- It will reduce competitive advantage
- It will reduce the leverage of manufacturers to negotiate deals with retailers and wholesalers
- Because of the need for different packages for the UK and elsewhere, it will increase costs
For the market:
- It will be much more difficult for new entrants to the market as the barrier to entry is that much higher
- This will reduce competition, stabilizing the markets for those already in play
- It will increase counterfeiting because the products are that much easier to copy
For the Government:
- Higher levels of counterfeiting will result in loss of excise duty and VAT
- And higher costs for identification of counterfeits and prevention of smuggling
Is there a cause and effect here? Does pretty packaging really encourage people to take up smoking? Is the effect of plain packaging legislation significant enough to justify the loss of property rights in trade marks consequently experienced by tobacco manufacturers?
One final thought, in view of the ‘ugliness’ and off-putting pictures now on plain packaging, perhaps there is a new market for attractive cigarette boxes, so that the original packaging can be discarded as soon as possible after purchasing!