Katherine Rich: The real cost of plain packaging

4 /10/2012 

Trademarks have been around since humans established any form of commerce. They have been used not only to show who made the products but also who owned them.

Cave drawings from around 5,000 BC show bison with symbols on their flanks, presumed to be ownership marks. The ancient Egyptians, Greeks, Romans, and Chinese used stamps or markings to indicate who made a product so people knew who to blame if there was a problem with it. In 1266, the Bakers Marking Law, which governed the use of stamps or pinpricks on loaves of bread, was passed in England. It is one of the earliest known laws on trademarks.

Fast forward to the 21st century, and nothing much has changed from those early days of commerce – apart from the fact that the markings and designs which distinguish a business or product have become much more valuable than the caveman who branded the flanks of his bison could ever have imagined. So much so that most successful businesses now list their brands and trademarks in their books as an asset.

So, while most people may shrug their shoulders and say, “trademarks – who cares?”, for a lot of businesses it’s a significant and highly prized part of their operation.  This explains why many businesses are concerned about recent calls for plain packaging on products which public health activists have deemed to be detrimental to our health. That concern has been heightened by indications that the Government may even be listening.

Those calls have centred on products as diverse as alcohol, infant formula, and hamburgers, and, of course, the current focus on tobacco. The supposed rationale is this: remove the colour and design and anything else that makes for glitzy and enticing packaging, and people will be less attracted to it, buy less of it, and that will solve the supposed ‘problem.’

The flaw in that argument is that because plain packaging – for any product – has yet to be put into practice anywhere in the world, there is absolutely no evidence it has any effect on changing people’s buying habits, irrespective of the reasons for doing it in the first place.

There are many implications from removing trademarks or branding from products. The most serious of these to New Zealand consumers is the threat to health and safety where food products are involved. Because plain packaging is easy to reproduce, products are more prone to counterfeiting by manufacturers who don’t have to abide by strict standards around ingredients, hygiene, and testing. The result is obvious and frightening.

But this is not just a debate about a company’s ability to sell its goods on the New Zealand market based on the goodwill and trust its products has built up over many years.

From an FMCG industry perspective, rubbing out a company’s legal right to commercial expression, as granted by the Trade Marks Act, also has serious ramifications for our status as a trading country. And for a country that relies for its existence on its ability to sell on international markets – deriving as we do something like 50 per cent of our income from exports – that’s something that cannot be ignored.

The Trade Marks Act is tied closely to two trade agreements to which New Zealand is a signatory – the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the Paris Convention for the Protection of Industrial Property. TRIPS was established to reduce distortions and impediments to international trade, and to ensure intellectual property rights do not restrict legitimate trade, while the Paris Convention sets standards of protection that countries must comply with.

Opinions on this are divided, but one body of thought says that if New Zealand were to introduce plain packaging then manufacturers would have to cease using their trademarks, and that would represent a failure to provide adequate protection for those assets. That could make us in breach of the trade agreements and expose us to dispute proceedings at the World Trade Organisation. The resulting damage to our reputation as a good, reliable trading partner would be huge, and the impact on our export income incalculable.

I sometimes wonder if any of this occurs to public health activists who blindly call for plain packaging as if it’s some sort of magic wand that will solve all our ills.

But let’s assume for a moment that we wouldn’t be in breach of international trade agreements, and we send our products overseas in plain packaging. Picture that leg of Canterbury lamb, pack of Anchor butter, or tin of Karicare Infant Formula sitting on a supermarket shelf somewhere in Europe or Asia in their plain brown wrappers alongside products from … well, who knows where. How would anyone who trusts New Zealand and its 100% Pure brand be able to tell the difference? And what would that do to our trade?

Before New Zealand makes up its mind on plain packaging it’s important to take into account all the long-term international costs of the decision.