A Politician´s Awareness – Plain Packaging and Public Choice

For the trade mark associations it is thus obvious that the legislative initiative, which was first made by Australia four years ago, is detrimental to trade mark holders. Without taking a stand on the health issue, which is quite clear, it seems that the results of this piece of legislation are not, at least so far, convincing. The question thus remains why plain packaging is so attractive to the proponents, particularly the politicians?

In the following I will try to suggest an answer by using the public choice approach, i.e. a theory used mainly by economists. First, a brief update on the legislative initiatives undertaken and those, which are in the making.   

Status of plain packaging legislation

As well known by now, the Australian plain packaging act came into force on 1 December 2012. It was first introduced to the Parliament in July 2011 and after a change in the enforcement date the legislation was passed on 21 November 2011. The second country to introduce this type of legislation was Ireland. The Irish president signed the bill on plain packaging for cigarettes just recently, on 21 May this year. The name of the law is the Public Health (Standardised Packaging of Tobacco) Bill 2014.The sale of plain packs is to be compulsory from May 2017, but packaging manufactured for Ireland has to be plain already a year earlier. The United Kingdom will most likely follow suit since a provision in this respect was approved by a clear majority of the House of Commons in March2015. The relevant language is included in the Children and Families Act 2014, and this is expected to come into force in May next year.

There are several countries in line believed to enact the same type of provisions as the above mentioned, such as Canada, France, New Zealand, Norway and Turkey. What may be holding them back, however, is the process under way challenging the Australian legislation in the World Trade Organization (WTO), which was initiated in May 2013 by Cuba, the Dominican Republic, Honduras and Ukraine. At least Finland, which has been in the forefront with legislation against tobacco by introducing display bans, smoke free zones etc., has announced that it will be awaiting the outcome of the WTO procedure.

Before taking a closer look at the public choice approach and applying it to plain packing, it is, in order to give a more or less complete picture, reason to mention the recent replacement last year of the 2001 EU Tobacco Products Directive with a new one, which in Article 24(2) is giving the Member states an option to introduce plain packaging legislation having first notified the Commission in addition to supplying the grounds for introducing it.    

Public choice – what is that?

The quite simple assumption of the public choice approach is that the same individuals act both in the marketplace and in the political process. According to James M. Buchanan, one of the early proponents, political decisions are not handed down from on high by omniscient beings, who cannot err. Individuals behave in market interactions, political-government interactions, cooperative-nongovernmental interactions and other arrangements. Politicians are thus also self-interested.

Focus is in other words on concepts, such as the rational ignorance of the voter and the self-interested legislator looking to maximize the likelihood of election and re-election. The self-interested legislators are thus not motivated by the desire to enhance public interest, but to endorse legislation that maximize their appeal to their constituents or by voting for those laws that are most responsive to active special interest groups. Since the difference on the outcome of an election is unaffected whether a voter makes an informed choice or chooses on the basis of existing knowledge it seems to be sensible or rational to be ignorant. Public choice theory sees itself as focusing on the continuing conflict between the so-called good politics and sound economics.

There are of course views that do not agree with this approach, such as the modern republican civic tradition. According to this approach political participants are seen to subordinate their private interests to the public common good. The result of an informed debate is an understanding of the greater good that is sought, and realizing this, politicians discipline their own private pursuits in order to realize the greater common good.

In order to achieve a realistic picture of the behavior and intentions of politicians you probably need to, I think, strike a balance between these opposite views. To quote Daniel A. Farber and Philip P. Frickey

“Where public choice theory risks cynicism, republicanism can verge dangerously close on romanticism. … Where public choice theorists see self-interest behind every statute, republicans hope to find a quest for the public good. “

Public choice applied on plain packaging

Almost any consumer package is a 24/7 salesman, i.e. it signals a message or messages to the consumer 24 hours a day 7 days a week as long as the package is displayed and has not been disposed of. The package does not only send a message or messages to the consumer about the product, but of course also what has been done to the package. If the use of the trade mark has been restricted in some way or another it does not go unnoticed by the consumer as long as he or she does not place the package in a separate box hiding the special features of the package.

This has of course not gone unnoticed by proponents of plain packaging either. By practically eradicating the trade mark and adding pictures, which, hopefully, discourage the potential smoker to start and encourage the existing one to quit, governments, i.e. politicians, hope to decrease smoking in society.

The review conducted by Quit Victoria and Cancer Council Victoria before introducing plain packaging in Australia suggests that packaging plays an important role in encouraging young people to try cigarettes. An interesting side effect was that smokers felt that cigarettes tasted worse in plain packaging. Furthermore, studies comparing existing branded cigarette packs with plain cardboard packs bearing the name and number of cigarettes in small standard font found plain packs to be significantly less attractive. In addition young people, when asked, confirmed that plain packs increased negative perceptions and feelings about the package and about smoking.

According to the reviewed studies plain packaging also increased behaviors such as hiding or covering the pack, smoking less around others, going without cigarettes and thinking about quitting. Almost half of the participants reported that plain packs had either increased the above mentioned behaviors or reduced consumption.

It can be argued that the plain packaging initiative is very much in line with the WHO Framework Convention on Tobacco Control. This means that in addition to age and content restrictions, advertisement and display bans as well as smoke free zones, restrictions on packaging combined with health warnings fall well in line with the measures encouraged to be undertaken by the signatories.

One of the reasons for the resistance against plain packaging, however, is that the package has been the only place where the trade mark can be displayed due to the overall ban on advertising, at least in Europe. It has thus been argued that as long as the product is legal, the manufacturer should be allowed to use its trade mark on the product to distinguish it from competing products. But when taking a closer look at plain packaging there is an additional feature combined with it, when thinking of the reason for its attractiveness, and which thus might explain it.

Namely by affecting the packaging it is easy for the legislator, i.e. politician, to show, very concretely, that something has been done. The action can be assessed by the constituency. It is thus in the interest of those politicians, who know that their voters resist smoking, to act in line with a proposal on plain packaging. On the other hand, and this might sound cynical, cigarettes are not prohibited as such, which might be against the belief of freedom of choice among many people.

Although they are pro any measures promoting health they are at the same time con, i.e. against a “Nanny” state, a government which is restricting freedom of choice of ordinary people. In addition to fulfilling these two purposes the legislated measure is also easy to control by the authorities. All in all there seems to be an incentive for a politician to promote the plain packaging proposal even though we do not know the effect of it. It is thus in line with the assumptions of public choice theory.

There is of course a further aspect. It is apparently also a financial matter. By not prohibiting the product it functions as a source of income for the government. It is clear, however, that price functions as a deterrent on young people, particularly, at least each time an increase takes place until you save on something else. The government agenda is thus apparently not only health oriented.

Concluding remarks

The reason for the popularity of the plain packaging proposal is in other words that it seems to fulfill the intentions of the self-interested politician and the government. Whether it serves the consumer is, at least at this stage, more doubtful. A more effective measure would probably be to create large smoke free zones, but this would of course create control costs as well as affect the revenue of the government.

The partial ban on smoking, which of course is important, is most advantageous, however, also with respect to those who do not smoke, which plain packaging does not affect at all as long as smoking is continuing.

It goes without saying that evidenced based legislation is to prefer also in this area. There will certainly be forthcoming empirical evidence either way in due course.

Max Oker-Blom
Adjunct Professor
Hanken School of Economics

The author is not in any way connected to the tobacco industry.