Plain packaging pay out to Mars would ‘certainly not be trivial’, says Institute of Economic Affairs

29-Jul-2014 - Last updated on 30-Jul-2014 at 13:04 GMT

Unearthed Mars correspondence with UK Department of Health reveals firms concern that mandatory plain packaging in the tobacco industry would set a "key precedent" for the application of similar legislation to other industries including food.

Mars in 2012 wrote to the UK’s Department of Health to express concern over the potential impact on branding and intellectual property rights should tobacco plain packaging policy be extended to food – something the Institute of Economic Affairs said could cost the government big bucks should a mega-confectionery brand take legal action.

Christopher Snowdon, director of lifestyle economics for UK think tank the Institute of Economic Affairs (IEA), told ConfectioneryNews it was difficult to speculate if or how plain packaging could move from tobacco to food and alcohol, but past experience supported a, “‘slippery slope' theory”.

“If the plain packaging was introduced for confectionery, the industry would complain in the strongest terms at the loss of their brands and the removal of a lever of competition. This could leave the government liable for compensation claims,” he said.

Recently disclosed government documents (pages 31-37) show Mars wrote to the Department of Health (DoH) in 2012 following talks on so-called plain packaging in the tobacco industry – meaning a product may only be presented in bare, colorless packaging with the company’s logo and relevant health information. While Mars does not have any tobacco ties, it said it was anxious about the precedent such legislation would set for its sector.

A statement from Mars this week said:"The 2012 response was not a comment on the specific policy, we were highlighting the need to ensure any legislation did not have unintended knock-on effects on brand equity and intellectual property within other categories.”

The Mars spokesperson added that the company would not be responding to the current UK consultation on tobacco plain packaging, which is due to close on August 7 this year. The DoH told us it was not currently considering plain packaging for the food and drink industry.

In its 2012 correspondence, Mars’ legal team wrote: “Mars is concerned that the introduction of mandatory plain packaging in the tobacco industry would also set a key precedent for the application of similar legislation to other industries, including the food and non-alcoholic beverage industries in which Mars operates.”

Compensation challenge

Snowdon said:“There is not yet a legal precedent because the idea is so new, but a recent report by BNP Paribas says that a successful lawsuit by the tobacco industry would require the British government to pay out up to £11bn [$18.63bn]. This is based on the market value of the brands.

“Any pay out to Mars, for example, would depend on the value of its brand, but it would certainly not be a trivial figure.”

When asked whether it would consider this kind of legal action against the state should such policy be extended to food and drink, Mars said it would not speculate further on possible implications.

Mars said in Australia brand owners had lost their registered and unregistered trademarks, copyright works, registered designs and patents, with no compensation offered.

Regulating representation

Snowdon said a number of public health groups already supported cigarette-style graphic warnings for alcohol as well as a tobacco-style total ban on alcohol advertising. In Australia – the only country as yet to have introduced plain packaging – some campaigners have called for plain packaging and/or graphic warnings for junk food.

“Since the ostensible aim of plain packaging is to dissuade consumption by the young, the policy could logically be extended to alcohol and certain food. The Indonesian government is already talking about it for alcohol.”

In its correspondence Mars said that it had already made efforts to help tackle obesity with reductions to fat content and portion sizes. It argued there was “no crucial and pressing industry-wide need” to

sugar spoon Melissa Wiese — Photo credit: Melissa Wiesse.

protect the public’s health through plain packaging, adding that reluctant manufacturers could be targeted by other means.

Meanwhile, the DoH said: “We are working with [the food and drink] industry through voluntary agreements to reduce calories and provide consumers with healthier food choices. This includes consistent front-of-pack labelling.”

Spot the difference

Mars said there was a lack of “robust empirical evidence” showing plain packaging legislation would be to the public’s benefit should it be applied to chocolate, other food and non-alcoholic industries.

Indeed the firm argued that non-verbal trademarks like logos, shapes, colors and sounds could also be “tools to help protect consumers’ health and safety” through differentiation.

“These trademarks enable consumers to identify the manufacturer of the purchased goods and thus identify the quality of the product bought (distinguishing, for example, a high quality organic product made in the UK from a low-price product manufactured in a country which does not have the same health standards as in the European Union).”