TOBACCO PRODUCT CONTROL AMENDMENT BILL, 1998
This submission is made by Worldwide Brands, Inc ("WBI"), which is incorporated in Wilmington, Delaware, USA with operation headquarters in Cologne, Germany and with offices throughout Europe, Japan, Hong Kong and Malaysia and in South Africa. It is a subsidiary of R J R Nabisco and is legally and financially separate from any tobacco company. WBI is the owner of various international brand names, which it licences throughout the world. It has acquired registered trade mark rights in these brand names throughout the world. It has no interest in and does not trade in tobacco products.
Brand Diversification
WBI is exclusively involved in the field of brand diversification. Brand diversification involves the commercial exploitation of the unique goodwill and asset value of an established brand name for business diversification purposes. It takes a well-known brand name, uses the goodwill as a basis for creating trade in fields totally unrelated to that in which the brand name was originally used, (and, if successful, eventually is recognised and is familiar to consumers in a totally different product category).
The main reason for brand diversification is to use the goodwill in the original brand name as a stepping stone in the creation of a completely new market.
WBI started its brand diversification programme in good faith before there were discussions relating to or legislation restricting tobacco advertising. By way of example, one brand of primary importance to WBI is the CAMEL brand. This started out as a brand used in relation to tobacco products and, since becoming the subject of brand diversification 17 years ago, the mark CAMEL has formed the basis of a substantial and growing international trade in products completely unrelated to tobacco. WBI is the owner of the CAMEL trade mark in all product categories other than tobacco. There is no direct connection between WBI and the tobacco producer. The trade in the products bearing marks resulting from proper brand diversification is completely unrelated to the trade in or fate of the tobacco products in relation to which the original brand name was used. A good example concerns the mark CAMEL in Germany, where there has been a substantial and progressive growth in the sale of footwear and garments bearing the mark CAMEL and a corresponding decline in the sale of tobacco products bearing the same mark. The consumer clearly distinguishes between tobacco products and other products in respect of which the mark CAMEL is used. A compIeteIy new and growing industry independent of and with no relation to trade in the tobacco products has been created through CAMEL brand diversification.
As a result of brand diversification, WBI's products are sold in 59 countries through more than 1 9000 retail outlets with consumer retail sales worldwide of in excess of about R3 285 224 000. The business and the product lines are continuously expanding.
EmpIoyment
Brand diversification results in substantial employment internationally and, in many cases, in significant local employment. In South Africa, 1 28 people are directly employed in the production of and trade in non-tobacco CAMEL products and about 920 are indirectly employed. A job analysis is set out below:
Number Directly Number Indirectly
Employed Employed
Camel Collection &
Adventure Wear 40 800
Camel Trophy
Adventure Boots 80 100
Camel Trophy
Adventure Watches 3 10
Camel Bags &
Adventure Bags 5 10
lmport replacement
Because the trade is international, products are usually of a high quality and comparable goods would normally be imported, there is import replacement and local manufacture replaces imported goods. This is good for local economics. In respect of CAMEL products, the value of import replacement in South Africa probably exceeds R25 million in each year.
WBI's concern
WBI is not concerned by a ban on advertising of tobacco products. However, it is extremely concerned by the proposed Tobacco Products Control Amendment Act, which not only prevents advertising of tobacco products but also impacts on products that have a similar name or logo to tobacco products. The first draft presented to us would have stopped any use (on any articles or for any activities) of any name similar to a name used in relation to tobacco products by businesses, charity organisations, municipalities, etc, whether or not there is an association with a proprietor.
The first draft of the proposed South African legislation was unprecedented in scope as it would not only have banned cigarette advertising but also banned the sale of any product bearing a mark corresponding in any way to a cigarette trade mark or logo, whether or not related to a producer of tobacco products, and any advertising of any such product.
The first draft was amended and a Bill was then published on 14 August 1998. It still impacts seriously on bona fide traders of non4obacco products. We now wish to comment on that Bill. Our primary concern is that, even if the full impact of the first draft has been reduced, which is not certain, the Bill will stop advertising of non-tobacco products even where there is no association with tobacco manufacturers. As advertising is essential to businesses, especially in the case of brand diversification, this could serve to destroy whole businesses, including our own, in South Africa.
Reasonableness
Throughout the world, it has been accepted that regulations which are intended to restrict an activity have to be in proportion to the objective to be achieved and the onus is on the legislator to prove that the objective can be achieved through the proposed legislation and cannot be achieved by any other less restrictive legislation. The proposed South African legislation aims to reduce tobacco consumption by banning advertising of tobacco products and imposing restraints on promotion of products and services bearing a trade mark corresponding to a tobacco name or logo. These restraints should be proven to be effective and reasonable. As far as we know, worldwide and in South Africa there has been no evidence showing any link between genuine brand diversification advertising and tobacco consumption.
Bearing in mind that both the United States and South Africa are members of the World Trade Organisation (WTO) and are bound by the provisions of the Agreement on Technical Barriers to Trade (TBT), we conducted an investigation as to whether South Africa in any way complied with the notification requirements contained in that agreement. We could not find any evidence that the WTO was officially notified. We have also been referred to possible conflict with the South African Constitution, the TRIPS agreement and the Paris Convention. We understand that various professional bodies and other organisations have made general submissions regarding the fact that South Africa may be in breach of its international obligations and we have no doubt that you will take all necessary steps to ensure that there is full compliance with South Africa's obligations. We are therefore not dealing with these issues but reserve the right to rely on them in due course if necessary.
We are particularly concerned by the potential impact of the provisions of Section 3 of the Tobacco Controls Amendment Bill and our more detailed comments are set out below.
The proposed amendments
The proposed Tobacco Products Control Amendment Act as published in a Bill on 14 August 1998 requires that the Act shall include the following provisions:
Section 2(a): "advertisement", means any written, still or moving picture, sign, symbol or other visual image or message or audible message, designed to promote or publicize a tobacco product or to promote smoking behaviour and includes the use in any advertisement or promotion to the public of a tobacco product manufacturer's company name or trade mark where the name or trade mark or any part of that name or trade mark is used or is included in a tobacco product trade mark and "advertise" has a corresponding meaning;
Section 2 (h): "trade mark" includes any trade mark whether or not it is registered or registerable as such and any part or recognizable variation thereof used on or in relation to a tobacco product;
Section 3 (1): No person shall -
(a) advertise, using any tobacco trade marks, logos, brand names or company names used on tobacco products; or
(b) use tobacco trade marks, logos, brand names or company names used on tobacco products for the purpose of advertising any organisation, service, activity or event;
Section 3 (2): No manufacturer, importer, distributor, or retailer of tobacco products shall -
(a) Organise or promote any organised activity that is to take place in whole or part in South Africa; or
(b) Make any financial contribution towards any organised activity that is to take place, or is taking place, or has taken place, in whole or in part in South Africa; or
(c) Make any financial contribution to any person in respect of -
(I) The organisation or promotion, by that person of; or
(II) The participation, by the person, in - Any organised activity that is to take place, or is taking place, or has taken place, in whole or in part, in South Africa-
where that organised activity involves the use, in the name of that activity, of a tobacco product trade mark, logo, brand name or company name used on tobacco products.
We contend that the effect of these provisions will be to create a loss of trading and trade mark rights and of trade and employment and is unjustifiably to take away the right to use trade marks, logos, brand names and company names of bona fide businesses, including WBI, without compensation for the substantial resulting losses. On a broad reading, they could stop the trade in goods of non-tobacco products and the use of company names where there is even a single letter that is common to a letter in a tobacco trade mark as the exposure of the goods on the shelves of retail outlets, for example, could be seen as promotion. On a narrower reading, they could stop advertising of non-tobacco products that are unrelated to tobacco manufacturers and could destroy whole businesses that are unable to promote their own products.
lnterpretation of "tobacco trade marks, logos, brand names or company names"
The term "tobacco trade marks, logos, brand names or company names" in the proposed Sections 3(1)(a) and (b) is not clear and is open to various interpretations.
The term could be applied broadly to cover all marks, logos, brand names or company names used on tobacco products whether or not they are used exclusively on tobacco products.
In the Tobacco Products Control Act 83 of 1993, the term "tobacco product" is defined as meaning any product manufactured from tobacco and intended to be smoked but there is no definition of "tobacco trade mark". The amendment to
the definition of "tobacco product" continues to use the word "tobacco" as an adjective but the amendment fails to define "tobacco trade mark". In the context of "tobacco trade marks", the word "tobacco" cannot be used in the same sense as in the definition of the term "tobacco product" and the proposed amendment does not provide any further guidance as to how "tobacco trade marks" is to be interpreted.
Considering that a trade mark is defined as including any trade mark whether or not it is registered or registerable as such and "any recognisable variation thereof", it is clear that the proposals intend to extend the definition of trade mark to any special form or recognisable variant of an original form of a tobacco trade mark. The term "trade mark", in this context, would therefore appear to extend to any special form or recognisable variant of any registerable or unregisterable trade mark that can be qualified as a "trade mark" used in relation to tobacco, even if it is used more widely in relation to other goods. The reference to "any part" in the definition could even extend to any letter of the alphabet used in any mark.
The reference to logos, brand names and company names extends this uncertainty.
Proprietorship
A relevant issue in respect of trade marks is usually that of proprietorship. The proposed amendment ignores this. If the definition of "trade mark" were to be based on that in the Trade Marks Act No. 194 of 1993, some form of proprietorship might be implied. However, the proposed amendment is silent on the issue of proprietorship and it seems clear that the amendments are directed not only at use of a tobacco trade mark, logo, brand name or company name by a proprietor but at any user in any field.
Interrelation of "Advertisement"
With this in mind, and bearing in mind the fact that the definition of "advertisement" extends to almost every possible form of communication, the proposed Section 3 of the Act could go far beyond what was intended. This is because the last part of the definition of "advertisement" is extremely unclear. Although the main part of the definition appears to be directed at precluding anyone from publicising or promoting smoking behaviour, there is the provision that this will "include the use in any advertisement (the definition therefore being dependent on the word that is defined) or promotion to the public of a tobacco product manufacturer's company name or trade mark where the name or trade mark or any part of that name or trade mark is used or is included in a tobacco product trade mark".
This does not make it clear that the promotion must be a promotion in respect of a tobacco product and if, as appears to be the case, it is intended to hit any promotion of any product (including a non-tobacco product) where the use of a tobacco product manufacturer's company name or trade mark or part thereof is in issue, the effect is astounding.
On face value, Section 3(1), if read with a broad definition of "advertise" could, stop any company having a name or mark that corresponds in any way to the name or mark used by a tobacco product manufacturer from advertising by using that name or mark or from using that name or mark in any way that could constitute promotion, for example by being displayed on shelves or in shop windows. Also, bearing in mind that the definition refers to "any part of" such a name or trade mark, this would effectively hit every company displaying its name in any way. This is because every manufacturer of tobacco products, if incorporated as a company, must include "(Proprietary) Limited" or "Limited" as part of its name and every other company must include the word(s) as part of its name so the name of every company would be affected. Furthermore, the word "part" could include any letter of the alphabet and, bearing in mind the diversity of tobacco names that appear in the trade, every letter of the alphabet must be the part of at least one such mark or name. Every company in any field would necessarily include part of the name of a tobacco manufacturer's name or trade mark in its own name or trade mark.
This is so far from being rational that it could never have been intended and a revision of the definition is undoubtedly necessary.
Proposal
In order to clarify the intent of the amendments, we believe that:
the last part of the definition of "advertisement" should be amended to read:
"includes the use of any promotion to the public of a tobacco product manufacturer's company name or tobacco product manufacturer's trade mark where the name or trade mark is used in relation to a tobacco product or the promotion thereof".
The definition of "trade mark" should be amended so that the words "and any part or recognisable variation thereof" are deleted.
In the proposed Section 3(1), the words "no person shall" in the preamble should be amended to read "no person shall, in order to advertise a tobacco product," and
At the end of 3(1) one could add the following:
"unless the advertising of any non-tobacco product, service, event, or organised activity will be perceived by the average consumer as being advertising to promote the sales of that non-tobacco product, service, event, or organised activity, rather than to promote the sales of a tobacco product"
In the proposed Section 3(2), the wording "no manufacturer, importer, distributor or retailer of tobacco products shall" should be amended to read "no manufacturer, importer, distributor or retailer of tobacco products shall, in order to advertise a tobacco product,"
This would clarify the intent of the legislation and avoid destroying the businesses of established, independent and bona fide traders. However, we also submit that there is a general principle that existing rights should not be taken away without very good cause. As there is nothing to indicate that the use of marks corresponding to those used for tobacco products by independent traders for non-tobacco products in any way promotes smoking, we submit that it would be wrong to remove the marks of established independent traders and that a "grandfather clause" should also be included to make it clear that existing, rights are not affected.
We respectfully submit that, unless these issues are taken into account, the amendments to the Bill will not only be totally inequitable but will be so far reaching as to affect every trader in South Africa in a manner that is beyond all reason. We therefore ask you to take our comments into consideration when the final form of the Act is determined.