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Big Tobacco’s looming High Court challenge to plain packaging law

It’s expected that the removal of trademarked images, designs and colours from tobacco packaging will make smoking less attractive. Valentin.Ottone

Health Minister Nicola Roxon announced today that the implementation of plain packaging for tobacco products will be pushed back until December 1 next year.

The Tobacco Plain Packaging Bill passed through the House of Representatives in August but is still held up in the Senate as the government attempts to get other legislation through.

Regardless of when the Bill becomes law and starts operating, tobacco companies have promised to take the government to the High Court to argue it is unconstitutional.

They say it takes their property without compensation but they will almost certainly fail in this argument.

Section 51(xxxi) of the Australian Constitution guarantees the Commonwealth government cannot acquire property without providing “just terms” compensation.

Probably the most famous case about this section of the Constitution is comes from the movies. In The Castle, an airport corporation wants to acquire the Kerrigan family home to expand the airport. Their lawyer famously sums up their case: “it’s the Constitution, it’s Mabo, it’s justice, it’s law, it’s the vibe, and, uh … No, that’s it. It’s the vibe.”

At the risk of spoiling the ending, the Kerrigans ultimately win in the High Court because the amount they were offered in exchange for their property was inadequate compensation for their emotional attachment to their home.

Most cases about this provision of the Constitution are far more prosaic. They involve technical legal analysis rather than the “vibe” of the Constitution or even any underlying moral considerations.

The legislation

The Plain Packaging Act will prevent tobacco companies from putting their trademarks on the packaging of tobacco products manufactured or sold in Australia.

Big tobacco would only be allowed to label the plain brown packs with their brand name and product names in a prescribed font and in a prescribed place.

It wouldn’t be allowed to use the trademarked images, designs and colours they currently use to distinguish their brands.

Tobacco companies argue that, in effect, the legislation acquires their trademarks – and that as the government won’t provide just terms compensation, the legislation is invalid or inapplicable.

The High Court takes a very wide view of property and there’s no doubt that trademarks are property. It has previously held that copyright is property for the purposes of s 51(xxxi) and suggested that patents are as well.

And the legislation undoubtedly limits what tobacco companies can do with their trademarks.

Nonetheless, tobacco companies’ argument will almost certainly fail because the plain packaging legislation won’t acquire their trademarks.

The High Court

The High Court draws a strong distinction between laws that restrict or regulate property and laws that acquire property.

The difference depends on whether the government obtains any property or anything related to property for itself. As two judges of the High Court wrote in a 1994 case, “The extinguishment, modification or deprivation of rights in relation to property does not of itself constitute an acquisition of property.”

For there to be an “acquisition of property”, the government (or someone else) must obtain “at least some identifiable benefit or advantage relating to the ownership or use of property”.

A Commonwealth law that takes a home to build an airport requires compensation; a law that restricts the use of the home or imposes conditions on what can be built does not.

Six judges agreed in a 2009 case – “[T]here can be no acquisition of property unless some identifiable and measurable advantage is derived by another from, or in consequence of, the … reduction of entitlements. That is, another must acquire ‘an interest in property, however slight or insubstantial it may be’.”

One judge disagreed strongly – but the consensus is clear.

This will be a key issue in the tobacco companies’ challenge.

Of course, the government acquires the satisfaction of implementing a regulatory scheme it believes will reduce smoking. But that’s not enough to constitute an acquisition.

The government

The government doesn’t get to use tobacco trademarks for itself. If it did, it would have to pay. It also doesn’t escape any obligation to the tobacco companies in relation to their trademarks or their packaging. Again, if it did, it would have to pay.

Rather, tobacco companies keep full control of their trademarks but are restricted in what they can do with them.

In short, it is very unlikely that, on current case law, a majority of the High Court would conclude the proposed legislation effected an “acquisition” of tobacco companies’ property rights.

And for that reason, compensation is not required.

Some people might regard this as a shortcoming in Australia’s constitutional protection of property rights. Governments can deprive owners of the value of their property just as much through regulation as they can through acquisition.

But, under current laws, the safeguards are political and not constitutional.

We should also be careful what we wish for. As a famous US judge once said, government could hardly continue if it had to pay for every change in the general law that affected the value of property.

And do we really want the courts to be involved in deciding whether a regulation of property is a “good” or “justifiable” regulation that should be allowed without compensation or a “bad” or “unjustifiable” regulation that requires just terms?

The research on which this piece is based was co-authored with Jason Bosland. It was originally presented at a seminar at Melbourne Law School organized by colleagues in conjunction with the Cancer Council Victoria and Quit Victoria.

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