ACCC resolves 'light' and 'mild' cigarette issue with B.A.T. and Philip Morris

The Australian Competition and Consumer Commission has obtained court-enforceable undertakings from British American Tobacco Australia Limited and Philip Morris Limited to remove 'light', 'mild' and similar descriptors from their products. The companies will also pay
$8 million in total to the ACCC to fund anti-smoking information campaigns and programs.

"Today's result successfully resolves the ACCC investigations into these two companies*", ACCC Chairman, Mr Graeme Samuel, said. "Had we instituted a court action to seek similar outcomes, we could be waiting years before a final court decision. In providing these court enforceable undertakings, BAT and Philip Morris have cooperatively and quickly dealt with the ACCC's concerns. The undertakings are being implemented now and will be completed over the next few months.

"The undertakings address the matters of most concern to the ACCC, that is, the removal of the 'light' and 'mild' descriptors, the prevention of further similar conduct and the provision of significant funds for consumer education programs to deal with claims that low yield cigarette brands are in some way better for you than higher yield brands".

The ACCC is one of the first regulators in the world to seek the specific removal of 'light' and 'mild' descriptors, which goes further than a 2001 European Directive on descriptors and the World Health Organisation's Framework Convention on Tobacco Control, which was ratified by Australia in late February this year.

BAT and Philip Morris are the two largest Australian tobacco companies, with a combined Australian market share of approximately 80 per cent.

"The ACCC has been seeking an industry wide solution to this important consumer health issue. However Imperial Tobacco Australia Limited, the third largest tobacco company in Australia with a market share of 20 per cent, has refused to cooperate with the ACCC", Mr Samuel said.

"Imperial Tobacco has not addressed the ACCC's concerns about removing these descriptors within a time frame consistent with that agreed to by the other two companies.

"Imperial Tobacco has also refused to make an appropriate contribution to consumer education programs proportionate to its Australian market share. This is remarkable given the company's $AU 47.6million profit last financial year, as part of a worldwide Imperial Tobacco group profit of $AU 2.1billion.

"Imperial Tobacco's attitude demonstrates significant lack of sensitivity and responsiveness to community concerns and expectations on this issue", Mr Samuel said.

The ACCC's investigations led the ACCC to the view that the tobacco companies, in using descriptors on cigarette brands and packaging such as 'light', 'mild', 'medium' etc and numbers (ie. '1','4', '7' etc), represented to consumers through the descriptors and related
marketing and packaging that there were health benefits in smoking those brands (known as low yield cigarettes due to claimed machine tested average lower yields of tar, nicotine and carbon monoxide) compared to higher yielding or full strength cigarette brands.

In the ACCC's view, such health claims for low yield cigarettes were likely to have breached section 52 (misleading and deceptive conduct provision) and other sections of the Trade Practices Act 1974, for reasons including the fact that it was generally known that smokers can, and do, compensate for claimed lower yields by smoking cigarettes in ways that obtain higher yields of tar, nicotine and carbon monoxide than indicated on the packets.

In response to the ACCC's concerns, BAT and Philip Morris have provided court-enforceable undertakings to the ACCC to:

• remove 'light' and 'mild' descriptors and related numbers from all cigarettes produced for Australian consumers (Philip Morris from 31 July 2005 and BAT from 31 May 2005)
• not make claims about the health benefits of low yield cigarettes when compared to high yield cigarettes, and
• pay $4 million each to the ACCC to fund anti-smoking information campaigns and programs concerning low yield cigarettes.

Copies of the BAT and Philip Morris undertakings are available on the ACCC's website.

Background

Following a lengthy investigation, the ACCC considered that BAT, Philip Morris and Imperial Tobacco Australia Limited had represented that low yield cigarettes marketed and packaged as 'light', 'mild', 'medium', 'ultra-light', 'micro' etc and/or brands bearing numbers such as '1', '4' etc referring to average levels of machine tested tar, nicotine and/or carbon monoxide emitted from cigarettes had certain health benefits in comparison to those marketed as regular or higher yield cigarettes.

In the ACCC's view, the claimed health benefits of low yield cigarettes compared to high yield cigarettes were misleading and likely to breach section 52 of the Trade Practices Act in that low yield cigarettes:

• are not necessarily less harmful to the health of a smoker
• are not necessarily a safer alternative
• are not necessarily less addictive
• do not necessarily reduce the risk of smoking-related diseases including lung cancer, cardio vascular diseases and emphysema
• do not necessarily reduce the risk of exacerbating asthma and respiratory disease
• do not necessarily assist a smoker to quit smoking cigarettes
• do not necessarily assist the smoker in reducing the number of cigarettes consumed

when compared to high yield cigarettes.

This was in part due to the ACCC finding that since at least the early 1990s tobacco companies and others have known that certain smoking behaviour (known as smokers' compensation) may deliver to the body higher levels of tar, nicotine and carbon monoxide than those levels produced by smoking testing machines, which are the levels stated on cigarette packaging as information messages. It is these levels which the tobacco companies have marketed and used as brand names such as '4', '8' etc. Scientific studies indicate that smokers are likely to compensate for such "light" cigarettes by inhaling more deeply, holding smoke in the lungs for longer, covering manufactured cigarette ventilation holes with the fingers or mouth, or smoking more frequently.