Plain packaging could go up in constitutional smoke

IT LOOKS as if the Government is about to give the tobacco companies a leg to stand on in their objections to plain packaging.

If the Government cops another hiding in the High Court it will be entirely of its own making. The successful refugee challenge, remember, related to Howard-era legislation. If the tobacco companies have a win, or a partial win, it will be in relation to Gillard Government legislation.

It is fairly technical stuff but the tobacco companies have a fairly solid legal point on at least one part of the legislation. I’ll explain that anon.

The legislation comes in two bits – one to stipulate that cigarettes can only be sold in plain packages and another to deal with how the tobacco companies’ trademarks will work once the plain packaging comes in.

The tobacco companies indicated in Senate committee hearing this week that they would be seeking billions of dollars in compensation. They did not put an exact amount on it, but said that their business was worth between $7 and $8 billion (in 1995), half of which was the value of their trademarks. These trademarks will become commercially useless in Australia once the plain packaging comes in.

The Government is, quite reasonably, concerned and wants to make its legislation waterproof and not the cause of a successful multi-billion dollar compensation claim.

But it has gone too far. Its legislation gives the Minister huge power to make regulations to fix up any unintended consequences of the plain-packaging legislation as they affect the operation of the Trademark legislation.

It is like a catch-all repair mechanism for minority government fearful that it would not get parliamentary approval to legislate to fix any unintended consequences – particularly an unintended consequence of leaving the Government exposed to a successful compensation claim.

But changes it proposes to the regulation-making power in the Trademarks Act looks to me to self-evidently unconstitutional.

Now here comes the technical bit, but bear with me.

The new legislation provides the Minister with a sweeping regulation-making power. It says, “Regulations made for the purposes of [giving effect to the plain-packaging legislation]: (a) may be INCONSISTENT with this Act; and (b) prevail over this Act . . . to the extent of any inconsistency.

But basic constitutional law tells you that a Minister cannot make regulations inconsistent with an Act of Parliament. The Minister, like everyone else, must obey the law. Further, it may be beyond the legislative power of the Commonwealth to delegate its power to the Executive so that the Minister in effect is legislating.

On first reading, I thought it was a misprint. Usually, the regulation-making power is described as to be NOT INCONSISTENT with the Act.

It will not take the High Court long to knock on the head any regulation the Minister purports to make that is inconsistent with any law of the Commonwealth Parliament.

Who drafted this stuff? Why is the Government risking another humiliation in the High Court, especially at the hands of the tobacco companies, whose arguments against the substance of plain-packaging are otherwise specious, contradictory, disingenuous and an affront to public health.

The Government seems to have been spooked into over-reaction. It has, in effect, said the Minister can do what he likes to defeat the tobacco companies – when legally the Minister cannot.

It is a bit like America’s response to 9/11; we will behave unlawfully to defeat an evil.

It is completely unnecessary and gives the tobacco companies a chance at a richly undeserved moral victory.

It would be richly undeserved because the tobacco companies’ fundamental constitutional point – that they have a right to compensation for not being able to use their trademarks on cigarette packages – has no merit.

Our Constitution is not like the US Constitution when it comes to property rights — and indeed most rights for that matter. It is quite weak and riddled with escape routes for the Government.

Our Constitution provides that the Commonwealth Parliament has power to make laws with respect to “the acquisition of property on just terms from any state or person”. The critical word is “acquisition”. Before just terms or compensation is required the Commonwealth has to “acquire” the property. If the Commonwealth just expunges or destroys the property without in any way using it or acquiring it for its own purposes, then no compensation is required.

Now I don’t think the Commonwealth is about to go into the business of flogging cigarettes under the tobacco companies’ trademarks. It is not “acquiring” the trademarks. Rather, the legislative scheme merely prevents the tobacco companies from applying their trademarks to tobacco products.

And the Constitution gives the Commonwealth power to make laws with respect to trademarks. That power includes the power to expunge trademarks, create trademarks and restrict the use of trademarks – as it did without any comeback when it restricted tobacco companies’ rights to use their trademarks in advertising.

It should be a straightforward task, but there is now a danger for the Government that its whole plain-packaging scheme will unravel if it substantially relies on the new defective ministerial regulation-making power.

The Government should fix this as the legislation goes through Parliament, before it is too late.

DOT DOT DOT

Other than the one legal point, the tobacco companies’ submissions to the Senate inquiry have been contradictory and almost self-incriminating. They argue that plain packaging would result in tobacco companies only being able to compete on price, so they would have to lower their prices.

More people would then be able to afford to smoke more and this — the implication runs — would be a bad thing. They admit their product is bad.

They say plain packaging would make smuggling easier – again, lowering prices and causing greater consumption of their — by implication — bad product.

Their main argument against plain packaging is that it would “lead to an increase in the uptake of smoking”. If their product is so bad why are they in the trade?

Then they say, “There is no real world data to demonstrate that the plain packaging of tobacco products will be effective in discouraging youth initiation, encouraging cessation by existing smokers, or increasing the salience of health warnings.”

Well, if plain packaging is so ineffective why are they so worried about it?
CRISPIN HULL
This article first appeared in The Canberra Times on 17 September 2011.

3 thoughts on “Plain packaging could go up in constitutional smoke”

  1. The High Court is not going to strike down a power to make inconsistent regulations unless there is an actual inconsistent regulation to strike down – without a regulation, there is no “matter” before the Court, and the Court would be giving an advisory opinion, which it does not do. Accordingly, unless the Government is foolish enough to make a regulation which is inconsistent with the Act, the tobacco companies are not “given a leg to stand on” and the Government will not “cop a hiding”.

    With that said, well spotted – the only complain is that, with respect, you’ve overstated the consequences of what you’ve found. Your analysis of the acquisition of property point is also sound – if it is not an acquisition of a trade mark to forbid its use on a billboard, or in a magazine, or in a television commercial, there is no sensible conceptual reason why it is an acquisition of the trade mark to forbid its use on packaging of a product. No-one has ever suggested that advertising bans have involved an acquisition of property.

  2. Hello Crispin, I believe that the tobacco coys have a strong argument on acquisiton of property based on the Georgiadis decision of 1994. The Cth expunged the right to sue at common law and the HC said that where that right existed as at the time the Comcare Act came into existence, it could not be expunged.

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