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EU Court Upholds Tough New Rules On Cigarette Labels

Dec 10, 2002 | Wall Street Journal

Tobacco makers were dealt a severe blow Tuesday as the European Union's highest court said they must comply with tough new labeling standards on cigarette packets, including a ban on the terms "light" and "mild."

The European Court of Justice's ruling ends a legal challenge brought by Imperial Tobacco Group and British American Tobacco PLC (BTI). The two British tobacco firms had tried to prevent the United Kingdom from implementing the law. The court said common labeling rules were needed to ensure free trade among the EU's 15 member states. "The new harmonizing directive makes it possible to prevent obstacles to the free movement of tobacco products within the Community," it said.

It has been a bad month for the tobacco industry. Last week EU health ministers moved to ban tobacco advertising on the radio, in newspapers and on the Internet. The court's ruling backs new EU regulations on labeling, due to take effect in September 2003, under which well-known brands such as Philip Morris Co.'s Marlboro Lights and Camel Lights, as well as European brands such as Austria's Milde Sorte and Portugal's Suave, will have to be renamed. The Luxembourg-based court also backed new laws obliging manufacturers to place larger and more graphic health warnings on all cigarette packets, but said the laws aren't excessive. It also said EU authorities were within their rights to set reduced limits on the levels of tar, nicotine and carbon monoxide in cigarettes. The ruling upholds a preliminary opinion given by the court's advocate general in September.

Despite the ruling, tobacco makers got one piece of good news - they can still use the controversial 'light' and 'mild' names for exports outside the E.U. That mostly helps British manufacturers such as Gallaher Group PLC (GLH) and British American Tobacco, which complain that thousands of export jobs would be jeopardized. But the court ruled that E.U. cigarette makers will have to abide by new rules on maximum levels of tar and other harmful substances on exports. This provision "makes it possible to prevent illicit reimports" into the E.U., the court said. But cigarette companies say that will hurt exports to Asia, Australia and Africa, where consumers demand stronger cigarettes.

Tobacco companies said the ruling wouldn't only be viewed with concern within the industry but also by the wider international business community. "Export bans have been virtually unknown since the height of the cold war," said Michael Prideaux, BAT's corporate and regulatory affairs director. "A new chapter in EU trade policies has been opened up by this decision." He says the EU is leading a "crusade" against the industry rather than regulating it in a reasonable manner. BAT and Imperial Tobacco Group PLC filed the case in September 2001. They claimed that the terms mild and light were part of the actual cigarette brand and EU attempts to remove them violated intellectual- property laws. It is the second time tobacco companies and the EU have clashed in court. Tobacco companies won the first time. In October 2000, the Luxembourg judges overturned an EU ban on tobacco adverts, saying the ban prevented free trade. The EU Commission reacted to its defeat by launching a new anticigarette offensive. The commission says 500,000 people die annually from tobacco-related illnesses. The outcome of the case could have important implications for Japan Tobacco Inc's JT International SA unit as it seeks to expand sales in Europe. Last fall JTI mounted a separate legal challenge to the law, arguing the ban would hit its Mild Seven cigarette brand. The company believes the EU legislation violates intellectual property rights because Mild Seven is a registered trademark in 132 countries, including in the 15 EU member states. The company couldn't immediately be reached for comment.

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