Where paternalistic regulation clashes with international trade obligations
At the heart of the common law duty to warn is the obligation of manufacturers to communicate risks inherent in ordinary usage of consumer products. The object of this requirement is to enable consumers to make informed choices about whether — and if so, how — they use such products.
Notwithstanding the intended purpose of the duty to warn, there is an increasing trend toward paternalistic regulation mandating the introduction of graphic health warning labels that are designed to deter consumers from using risky products. These initiatives, mandating the taking of significant portions of a product’s labelling area may breach international trade agreements if they unjustifiably encumber intellectual property or are more trade restrictive than necessary.
In 2010, Thailand proposed mandating the use of graphic warnings on all domestic and imported wine, beer and liquor bottles with the aim of deterring consumers from drinking alcohol. For example, one of the proposed graphic health warnings depicts a pair of bare feet hanging in the air after an apparent suicide and the words, “Alcohol consumption could alter consciousness and lead to mortality.” These proposed labels would cover 30%-50% of the bottles’ surface.
In a similar fashion, Kenya’s Alcoholic Drinks Control Act 2010 requires health warnings to occupy a minimum of 30% of the total surface area of the package. The warning labels proposed by Thailand and Kenya are “technical regulations” for purposes of the WTO Agreement on Technical Barriers to Trade. Accordingly, the measures must be no more trade-restrictive than necessary to fulfil the legitimate objective of protecting human health.
However, graphic health warnings on alcohol are arguably an unnecessary trade restriction because empirical evidence indicates that graphic health warnings on other risky products are ineffective in reducing consumption. SeePublic Health Research Consortium (PHRC) Report commissioned by the UK Department of Health, “Evaluating the Impact of Picture Health Warnings on Cigarette Packets” (2010). Furthermore, such health warnings may also unjustifiably encumber intellectual property rights in violation of national governments’ obligations under the Agreement on Trade Related Aspects of Intellectual Property Rights and the Paris Convention.
After Thailand alerted other governments to the proposal, Argentina, Australia, Chile, Mexico, the EU, New Zealand, Switzerland and the U.S. raised objections to Thailand’s proposed graphic warnings on alcohol before the World Trade Organization (WTO). These WTO members invited Thailand to clarify the evidence base for the proposed graphic health warnings on alcoholic beverages and consider other less trade-restrictive measures. The key concerns expressed by member states to the WTO related to the evidential basis used to justify the proposed warning labels. To date, such evidence has not been forthcoming.
The paradigm shift away from the common law duty to warn
Regulators are increasingly imposing warning requirements that are not formulated with reference to the accurate communication of risk and informed decisions by consumers. The implementation of labelling proposals like that proposed by Thailand underscores the paradigm shift from informing consumers of risks to attempts at deterring consumption through shock and fear. By shocking, rather than informing consumers, regulators are seeking to denormalise legitimate, taxed products. While public health goals and advocacy are very important, government-sponsored denormalisation of a legal, taxed product is not a legitimate government objective and raises a variety of trade related concerns discussed above.
Governments are, in the name of public health, migrating away from the common law’s intended purpose for warnings on consumer products. Rather than allowing informed consumers to make their own educated decisions, regulators are seeking to make consumers’ choices for them by requiring warnings intended to denormalise legitimate, albeit risky, products in the eyes of consumers in an effort to get consumers to stop using them. These regulatory initiatives raise a plethora of international trade law issues. They amount to an unjustifiable encumbrance of valuable intellectual property rights and, if implemented, are likely to result in significant international trade disputes and other litigation because, at bottom, there is no credible empirical evidence to justify these measures.
Philip A. Pfeffer is a partner in the products liability/litigation practice in the London office of Chadbourne & Parke