Here's an unsurprising news flash: Lawmakers hate the tobacco industry. In recent months, the tobacco industry has faced legal attacks like never before. These attacks have gone far beyond the usual class-action lawsuits brought upon it by consumers and have instead come from large authoritative bodies laying down the law.
In the United States, the Food and Drug Administration and the Centers for Disease Control and Prevention have been doing their best to curb the appeal of smoking. The CDC spent $54 million on its graphic 12-week television advertising campaign to get consumers to kick their nasty habit -- and according to traffic visits to its help-quit website and phone calls to its help-quit hotline, they worked very well. The FDA has been recently pushing tobacco producers for more concrete statistics about the make-up of their cigarettes.
As I've suggested in the past, this is bad news for U.S.-based tobacco companies like Altria
I've often suggested that the safe haven for investors who are intent on profiting from consumers' tobacco addiction is to look internationally. Well, that safety net just had a few holes cut in it.
Australia's High Court upheld a groundbreaking decision that will require tobacco companies, including Philip Morris International
International tobacco suppliers like Philip Morris and British American Tobacco had argued that the removal of its brand image represented an acquisition of owned intellectual property without due compensation. Australia's High Court struck down that assertion and now sets the table for the European Union to potentially introduce similar legislation, using Australia as its precedent.
However, before you freak out -- don't! Australia represents a very small piece of the international pie for Philip Morris and British American Tobacco. For Philip Morris, which practically counts the entire globe as its customer, a much more damaging blow would be if other parts of Southeast Asia or China itself were to take up such harsh legislation. That's where the growth is for international tobacco providers at present, and it seems very unlikely that we'd see legislation like what we've seen from Australia in other Southeast Asian countries anytime soon.
In the meantime, keep your eye on what, if anything, the EU does in response to this legislation, and, once again, do your best to avoid highly legislated countries (ahem, the United States, ahem) if you choose to invest in the tobacco sector.
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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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