Freedom of Commercial Speech Trust
FREEDOM OF COMMERCIAL SPEECH TRUST


COMMENTS IN RESPECT OF THE TOBACCO PRODUCTS CONTROL AMENDMENT BILL

1. The Freedom of Commercial Speech Trust submits the following comments on the Tobacco Products Control Amendment Bill ("the Bill"). We submit these comments in response to a request by the Department of Health and in the belief that we make a meaningful contribution to the formulation of the legislation. We wish to record that we make this submission while reserving our rights to make oral submissions to the National Assembly Portfolio Committee on Health and the NCOP Select Committee on Social Services, and at any other bodies or institutions where an opportunity to make such submissions will be granted.

2. As we informed the Department of Health in writing in early 1997, the Freedom of Commercial Speech Trust was formed to defend the right, as enshrined in the Constitution, to freedom of speech in the commercial sense, on behalf of the marketing and communications industries in South Africa. We are also supported through association by a variety of organised business and consumer bodies, as Associate members.

3. As such, the Trust is the authorised body representing, inter alia, the Association of Marketers (ASOM), the Association of Advertising Agencies (AAA). the Print Media Association (PMA), the National Association of Broadcasters (NAB). the Outdoor Advertising Association of SA (OAASA), the National Consumer Forum (NCF), the Direct Marketing Association (DMA), the Franchise Association of SA (FASA). the Grocery Manufactures Association (GMA) the International Advertising Association (IAA), the Public Relations Institute of SA (PRISA), the International Association of Business Communicators (IABC), the Direct selling Association (DSA), the Afrikaanse Handelsinstituut (AHI), the American Chamber of Business (AMCHAM), the South African Chamber of Business (SACOB), The Council of South African Banks (COSAB), and the Institute of Directors (IOD). The above organisations represent an aggregate membership in excess of 85 000.

4. We thus represent a large and important section of the South African business community, who between them make a major contribution to the South African economy, inter alia by providing hundreds of thousands of jobs to South African workers, and by paying hundreds of millions of rands in taxation and duties.

5. We are a body that exists to defend a principle, not individual products, and to defend the legitimate business interests of our members. Our comments on the tobacco legislation must be seen in that light.

6. The Trust operates on two basic beliefs:

6.1 to negotiate openly and in good faith on matters of freedom of commercial speech with all relevant parties. including government: and

6.2 to provide the South African consumer with more information about products, rather than less, on the basis that if a product is legally manufactured and sold, it has the right to be responsibly promoted.

7. Regarding the Bill, we must start by expressing our grave concern at the process by which the Bill has been introduced.

8. We believe that in the spirit of consensus and democracy, upon which this government is founded, it is necessary that the imput of all interested parties be sought in the process of preparing legislation, and certainly prior to the tabling of such legislation. We believe that in the spirit of the Constitution all these processes must be open and transparent

9. Although this process of consultation has apparently taken place, it would appear that the manner in which consultation was effected was deficient.

10. This is borne out by the fact that the Cabinet has approved the proposed legislation, prior to comments being sought from the public and interested parties and that the Bill was published on the same date as the closing date for comments on the proposed Bill.

11. Further, we are concerned that adequate attention has not been paid to the immediate negative economic effects this legislation would have.

12. It is proposed that the total issue should be taken into consideration, and that other issues besides health, like the economic, labour and tax implications should be weighed and that a sensible and workable solution be negotiated with all interested parties.

13. The Bill states in the preamble what the intention is with the legislation. It is submitted that the restrictions should be tested against the principles in the preamble and should not be more extensive than necessary to achieve those principles.

14. The preamble states, inter alia, that certain principles are recognised in the relation to the use, supply and advertising of tobacco, and that due to these recognised principles it has been resolved to discourage the use of tobacco in all its forms and to prohibit certain types of advertising of tobacco products in order to reduce the incidence of tobacco related illnesses and diseases.

15. The Trust recognises the concern of and interest in the health issues by the Department of Health, and wishes to record that it fully supports the endeavours of the Department to ensure a healthy community and environment. We want to make a meaningful contribution and are willing to work with the Department of health to achieve their objectives.

16. However, it is our concern that other equally and even more health threatening issues are not addressed. The incidence of pollution in large parts of the Gauteng area, which has been a grave concern for those affected and which causes widespread illnesses, is not been addressed.

17. Certain of the "recognised" principles on which the Bill is based, are not generally accepted principles and empirical studies have not proved it on a balance of probabilities.

18. This is especially true in respect of paragraph a(v) of the preamble which states that:
"The association of smoking with social success, business advancements and spoiling prowess through the use of advertising and promotion has particularly harmful effect by encouraging children and young people to take up smoking..."

19. If it is accepted that "lifestyle advertisements" as described in paragraph a(v) of the Preamble do lead to smoking it does not follow logically that all advertisements, especially those containing health warnings, have the same effect.

20. A total ban on advertising would have the effect that health warnings, which have been proved to have the greatest effect on the reduction of smoking, will also disappear. This will have the unintended effect that smoking could actually increase.

21. If reduction and avoiding of smoking among the youth is one of the main objects of the Bill, it is not clear why the minimum age to buy cigarettes is 16. A person can only vote and drive a car once he/she has reached the age of 18 but in terms of provisions in the Bill he/she can legally buy cigarettes and therefore start to smoke at 16.

22. The constitutional effect of the Bill is also a matter of concern. Section 16 of the Constitution of the Republic of South Africa I08 of 1996 provides inter alia:

"( 1) Everyone has the right to freedom of expression, which includes -
(a) freedom of the press and other media;
(b) freedom to receive or impart information and ideas; "

23. Section 4 provides that a juristic person is entitled to the rights in the Bill of Rights to the extent required by the nature of the rights and the nature of that juristic person. This section clearly gives the right of freedom of expression to companies registered in terms of the Companies Act, as well as to any other juristic person, whether in common law or in terms of a specific enabling act.

24. The right of freedom of expression may be restricted, but the restrictions must be in accordance and within the limits laid down by section 36 of the Constitution.

25. Section 36 of the Constitution provides that:
"(1) The rights in the Bill of Rights may be limited only in terms of law of general application to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity; equality and freedom, taking into account all relevant factors, including -
(a) the nature of the right;
(b) the importance of the purpose of the limitation:
(c) the nature and extent of the limitation;
(d) the relation between the limitation and the purpose; and
(e) less restrictive means to achieve the purpose.

(2) Except as provided in subsection (1) or any other provision of the Constitution, no law may limit any right entrenched in the Bill of rights.

26. "Commercial expression" is defined as "speech which proposes a commercial transaction...": see Central Hudson Gas & Electric v Public Services Commission 447 US 557,100 SCt 2343 (1980). It is clear that commercial advertising directly or indirectly proposes a commercial transaction therefore falls within the definition of "commercial expression".

27. It is accepted that commercial expression as a species of expression should be accorded the same protection tinder section 16 of the Constitution. This fact was accepted in Virginia State Board of Pharmacy v Virginia Citizens Consumer Council 425 US 748,96 SCt 1817(1976).

28. The amendment to the Tobacco Products Control Act 83 of 1993 will have the effect that:

28.1 It shall be unlawful for anyone to:
28.1.1. advertising using a tobacco trade mark, logo, brand name or company name;
28.1.2 to rise tobacco trade marks, logos, brand names or company names to promote an organisation or event

28.2 It shall be unlawful for a manufacturer, importer, distributor or retailer of tobacco products to organise or promote or give financial assistance, either directly or indirectly to a person or an organiser of the event if the activity the use, in the name of that event. of a tobacco trade mark. logo, brand name or company name.

29. "Advertisement. in relation to any tobacco product, means any statement, communication. representation or reference distributed to members of the public or brought to their notice in any other manner and which is intended to promote the sale of such or encourage the rise thereof or draw attention to the nature, properties, advantages or rises thereof and "advertise" has a corresponding meaning.

30. It is clear that the restrictions are extremely wide, and it the definition of advertisement is taken into account, it is clear that even communication between a company and its shareholders, which is obligatory in terms of the Companies Act 61 of 1973, will also fall within the ambit of the Act.

31. In addition to the above it should be pointed out that there are numerous other drafting deficiencies in the Bill. Some of these are:

31.1 The Bill does not define a "company name". There are definitions in other Acts but no reference is made to these definitions. If the common law rules of interpretation are used, it will lead to confusion and uncertainty. In a provision that carries the draconian fines as prescribed, certainty is of utmost importance.

31.2 Why are companies singled out in the Bill to be the subject of regulation? There are numerous other business forms that are excluded.

31.3 The definition of "trade marks" is too wide and non-tobacco trade mark usage will also be prohibited under certain of the sections.

31.4 Enforcement, especially in respect of the workplace provisions, will be impossible, which will have the effect that the enforcement will be on a selective basis, This obvious defect is in itself unjust and inequitable.

31.5 Statutory obligations, like the provision of annual financial statements to shareholders will be an offence in terms of the Bill.

31.6 A private dwelling could, in terms of the definition of "public place" also become a place where smoking is prohibited. This is obviously an unjustified restriction of personal rights and an infringement of rights to privacy.

31.7 The general prohibition in section 3 of the Bill that "No person shall:", is extremely wide, and the wearing of clothing bearing a tobacco trade mark by an individual would be an offence in terms of this provision. This also prohibits the transmission of satellite feeds carrying tobacco advertisements, although the person distributing the feed is not actually advertising.

32. The Bill infringes on the right of free expression and the question that needs to be answered is whether this restriction complies with the requirements of section 36: S v Zuma & Others 1995(2) SA 642 (CC). It should be borne in mind that the party that seeks to uphold the limitation bears the onus of proof on a balance of probabilities: S v Makwanyane 1995(3) SA 391 (CC).

33. The limitations on the freedom of expression were tested in the United States in the Supreme Court decision of Central Hudson Gas v Public Services Commission 447 US 557 100 SCt 2343 (1980). The Supreme Cotta found that if commercial speech is in respect of a lawful activity, and it is neither false, deceptive or misleading, it is entitled to protection under the First Amendment. Limitations by government will be upheld if the governmental interest in the restriction is substantial, if the restriction directly advances the governmental interest and the restriction does not exceed the limits of necessity for the advancement of the governmental interest. In Edenfield v Fane 123 Led 2D 543, 113 SCt 1792 (1993) the last requirement was stated as being "reasonable" to serve the governmental interest.

34. The test as stated above was also affirmed by the Supreme Court in 44 Liquormart Inc v Rhode Island 134 Led 2d 711(1996). It can thus be accepted that it is the applicable test to determine the limitations of the right of freedom of expression. The lack of precedent in South Africa, as well as section 39(1)(c) which states that in interpreting the Bill of Rights a court may consider foreign law, indicate that our Courts will take cognisance of the developments and interpretation of equivalent enactments in foreign jurisdictions.

35. In RJR-McDonald v Attorney-General of Canada (1991) 82 DLR (4th) 449 (Que SC) the Quebec Superior Court struck down a statute that prohibited the advertising of tobacco products. The Court was faced with the question whether a banning of advertising of a legal product infringed on the freedom of expression. The government argued that it was impractical to ban tobacco products and chose the lesser alternative to ban advertising of the products. The court found that the evidence failed to prove a causal connection between advertising and tobacco consumption. Therefore the restriction on the freedom of expression was unjustified.

36. The Supreme Court of Canada in the RJR-McDonald case upheld the decision of the Quebec Superior Court, but on different grounds. The Canadian Tobacco Products Control Act was much narrower than the South African Bill, in that it permitted the use of the company name in certain events as well as certain publications originating from a foreign source. However, the Canadian act was found to be in contravention of the freedom of expression in that certain prohibitions did not pass the "rational connection test" in that no rational connection could be found, on a balance of probabilities, between the particular ban and the socio-economic interest of the Government. These were the bans on promotions and the use of a "tobacco" trade mark on non tobacco products.

37. Although the limitation provisions in section 36 of the South African Constitution are wider than those in the United States and Canada, it is submitted that the onus of proof will require that the person seeking to impose the limitation will at least have to prove the justification of the limitation on a balance of probabilities. In discharging this onus the interest it seeks to protect and the means in which that protection is sought will be necessarily be central.

38. In the Tobacco issue this is particular importance as no proof on a balance of probabilities, exists that advertising causes smoking. At best it could be stated that the authorities are divided. Due to the fact that there is no proof on a balance of probabilities that the death penalty serves as a deterrent for would be criminals, the abolition of the death penalty is justified and not an infringement of the Constitution.

39. The purpose of the Bill is not clear and some deductions can only be made from press reports. It is apparently to protect children from smoking and also from second-hand smoke. If this is the purpose of the Bill, the provisions do not serve that purpose and if they do, they are not reasonable to protect the Government interest vis-a vis that purpose for the following reasons:

39.1 There is no empirical statistical analysis that proves on a balance of probabilities that a ban on advertising lowers the consumption of tobacco or will lessen the incidence of first-time smokers. In respect of the Australian market the following conclusion was reached by Lester Johnson of Macquarie University, NSW, Australia in a study titled "Advertising Expenditure and Aggregate Demand for Cigarettes in Australia", covering the period 1961/ 62 to 1982/ 83:

"The conclusion that can be reached on the basis of the empirical work carried out in this study is that no statistically significant evidence could be found that suggests either that total advertising has a positive effect on total cigarette demand or that the electronic media ban on cigarette advertising had a negative effect on the demand function of cigarettes."

39.2 In studies of the United States markets the following was found:
" The major finding in this study (Wilcox and Vacker Cigarette Advertising and Consumption in the United states, 1961-1990") is that the aggregate advertising expenditure and total consumption of cigarettes in the United States are not significantly related from 1961-90. The socio-economic and health variables were included in the analysis primarily to explain variance in consumption that might otherwise be attributed to the advertising variables, but they do have relevance to the consumption series. For example the consumer price index for cigarettes exhibited a negative relationship with consumption, suggesting that an increase in the relative price of cigarettes would be associated with a decrease in cigarette consumption. Per capita income exhibited a positive relationship with consumption, suggesting that increases in per capita income would be associated with increases in cigarette consumption.

39.3 These findings suggest as other researchers have found, that aggregate cigarette consumption is primarily related to price and income and not to advertising expenditures (Peto J, Price and Consumption of Cigarettes: A Case for intervention?" 1974 British Journal of Preventative Medicine; Fujii ET, "The Demand for Cigarettes: "Further Empirical Evidence and its Implications for Public Policy" 1980 Applied Economics, Bishop JA and Yoo JH "Health Scare, Excise Taxes and Advertising Ban in the Cigarette Demand and Supply" 1985 Southern Economic Journal ..)"

39.4 It should be noted that research in England, the OECD countries and South Korea, the latter a developing country like South Africa, provided the same results (See Stewart M "The Effect on Tobacco Consumption of Advertising Bans in OECD Countries" (1993) and Wilcox G, Tharp M and Ki-Tae Yang "Cigarette Advertising and Consumption in South Korea 1988-1992" (1994).

40. In light of inconclusive evidence that advertising bans have the effect that consumption of cigarette products is reduced, it is submitted that the Government will not be able to prove on a balance of probabilities that the ban on tobacco products would be a "reasonable" measure to serve the Governmental interest to reduce smoking and therefore the concomitant health risks in primary smokers.

41. The incidence of second hand smoke is a different question and here the rights of the non-smokers as opposed to that of the smokers must be determined. It is clearly a right not to inhale second hand smoke and therefore it can be seen as a basic right of the non-smoker. This right can be protected, without infringing on the right of the smoker, in prohibiting smoking in enclosed areas. This prohibition has, of course, nothing to do with the banning of tobacco advertising and is a sensible balance between the rights of the two opposing parties. In this regard it is noted that the Bill seeks to provide its own and unique definition of a "workplace", which differs vastly from that provided in the Labour Relations Act 66 of 1995. This modus operandi ignores the principle of certainty and as such is unacceptable.

42. If the Bill becomes law, it will affect long and medium term contracts for sponsorship and advertising worth in excess of R 240 000 000. This will have the effect that existing rights are amended, which is extremely unjust, and an act that cannot be justified in the public interest.

43 The effect of a tobacco ban on the advertising, media and marketing industries will be far reaching and a total revenue in excess of R240 000 000 will be lost. This will have a severe impact on jobs in the industry and related supporting industries. The stated intention of government is to create jobs and this aspect is mentioned in virtually every Green and White paper as well as the RDP Base Document. It is therefore not clear how legislation could be that goes directly against Government policy. It should be noted that this will also place an increased burden on the Fiscus which will have to carry the unemployed and provide for a re-adjustment. If this is the price that is to be paid for lower health care, it may be justifiable, but convincing arguments and statistics indicate that no benefits will be obtained in the reduction in health expenditure.

44. One of the basic principles in the White Paper on Broadcast policy is that of media diversity. The imposition of the ban on tobacco advertising legislation would result in the immediate loss of in excess of R240 000 000 in advertising revenue to media organisations. This will severely act viability across the entire sector. While the larger media companies may well be able to absorb this loss, however painful, many smaller media ventures will not. They face closure. Therefore the effect of the ban will be exactly the opposite of the stated Government policy. The stating of general principles and the imposition of rules that militate against these principles make rational business planning impossible and has a negative effect on the creation of wealth and jobs.

45. The health issue in the smoking debate, which is apparently the driving force behind the advertising ban, is also unconvincing in economic terms. The principle that is stated here is that smoking related diseases place an unmanageable burden on primary health care. The White Paper on Health on the other hand states that 33% of admissions to hospitals are liquor, and not tobacco related. It would therefore seem that the burden is overemphasised. Even if that is not the case, tobacco products are the highest taxed of all legal products, with a total excise tax in excess of 50% of the purchase price. This means an income to the Fiscus in excess of R2 billion per year. This income is more than adequate to treat smoking related diseases, which exposes the argument in respect of health care costs as fallacious. Proceeds of the excessive excise tax could also be paid into a trust fund and be utilised to provide proper information to the youth on the dangers of smoking, aids and the like. In this manner the principle of more information not less will be served and a lasting investment in the youth of South Africa will be made.

46. The contribution of the tobacco industry in excise taxes alone is in excess of R2 billion per year. Should the tobacco ban have the desired effect as sought by government, this will lead to a loss in revenue for the Fiscus, a loss that has to be replaced by other sources of revenue. Certain of these sources have been named as a possible tax on advertising. It would seem to be a backward move to extinguish a sure source of tax, with no concomitant socio-economic benefits, in favour of another "rats and mice tax. This modus operandi is not only short sighted but also makes a mockery of sound fiscal discipline and makes sound business practices and planning impossible.

47. In light of the above arguments and information we wish to state that we agree with the basic principles as to public health and smoking as stated in the Bill, but we are of the opinion that the same results could be achieved in a less restrictive manner which will not have the totality of ripple effects as would be the case with the present Bill. We are ready to work with the Department of Health to achieve the health objectives and are committed to provide the best talents and skills available in the communications industry to ensure an equitable solution for all.

48. We therefore recommend that:

48.1 In light of the constitutional issue and the importance of free speech, a total ban on advertising is inappropriate. We therefore recommend that tobacco advertising should be regulated along the following principles:

48.1.1 Restriction of the size and type of newspaper advertisements. This will comply with the principle that "lifestyle advertisements" may be inappropriate. Less restrictions would apply in the case of magazines with an adult readership profile.

48.1.2 Restrictions on the size and location of outdoor advertising. This principle is already applied and can be structured along the lines of the principles in the Advertising on Roads and Ribbon Development Act 21 of 1940. Restrictions can also be placed, as in the United States of America, on advertisements near or in the close proximity of schools.

48. 1.3 Cinema advertisements can be restricted to screenings where the age restriction of the feature film is 18 years.

48.1.4 Sports sponsorships should be phased out on principles to be agreed by the Department of health, the sponsor concerned, and most importantly; the relevant sports bodies and institutions receiving the direct sponsorship benefit.

48.2 Certain sections in the Bill be redrafted to exclude the unintended wide effect. In this respect it is suggested that:

48.2.1 The definition of "advertisement" be redrafted to restrict private communications and use of certain tobacco product articles such as clothing.

48.2.2 definition of "public place" be redrafted to exclude certain private places or places where people enter on certain conditions, like private clubs.

48.2.3 The sale of cigarettes to persons under the age of 18 be prohibited. This will be in line with the general principles in law as to when a person is not deemed to be a minor.

48.3 That a Trust be established, funded with money from the private sector, and that the Trust will develop and launch an information campaign which will alert and educate the youth about the dangers of tobacco use, liquor abuse, unsafe sex and violence. We pledge our support and will, if called upon, be instrumental in using our resources to ensure the success of the Trust.

49. In closing we wish to repeat that we are committed to achieve an equitable and workable result for all concerned and stand ready to provide the skills and infrastructure if called upon to do so.

PA DELPORT
EXECUTIVE DIRECTOR