(Comtex Finance Via Thomson Dialog NewsEdge)Oct 04, 2006 (New World Publishing via COMTEX) --The European Commission (EC) demonstrated last week that it intends to maintain its strong stance on tobacco advertising when it sent "letters of formal notice" to the Czech Republic, Hungary, Italy and Spain for non-compliance with the Tobacco Advertising Directive of 2003. The infringements relate primarily to exemptions from the sponsorship ban, which these four member states have allowed while integrating the Tobacco Advertising Directive into respective national legislation.

The member states have been ordered to bring their legislation into conformity with the directive, and have two months to reply to the formal notification. States failing to do so face threats that the EC will proceed with a formal infringement process.
"The Tobacco Advertising Directive is one of the cornerstones in our fight against tobacco, and I urge member states to apply it properly," Markos Kyprianou, EU commissioner for health and consumer protection, said in an EC press release. "Stopping the glamorization of tobacco through advertising and sponsorship is a key aspect in reducing the number of people who smoke or start to smoke. Previous action taken by the commission against other member states in relation to this directive demonstrates that I will not hesitate in taking steps to ensure that it is fully and properly applied."
The Tobacco Advertising Directive bans tobacco advertising in printed media, on radio and over the internet. It also prohibits tobacco sponsorship of cross-border events or activities. It applies only to advertising and sponsorship with a cross-border dimension. Advertising in cinemas and on billboards or use of merchandising (e.g. ash trays or parasols) therefore falls outside the directive's scope, but can still be banned through domestic legislation - a course chosen by several EU member states. Tobacco advertising on television has been banned in the EU since the early 1990s, and is governed by the TV Without Frontiers Directive. The directive does not allow exemptions of any kind regarding prohibitions on tobacco advertising and sponsorship.
As stated in the press release, the European Commission is stepping up its efforts to urge EU-wide conformity. The European Parliament and Council ratified the Tobacco Advertising Directive in 2003, and member states were to have brought domestic legislation into compliance with the directive by July 31, 2005, and to communicate which measures were taken to the EC.
In October 2005, the EC sent a letter of formal notice to 12 member states that had failed to communicate these measures. Germany and Luxembourg are the only states to have not provided this information.
During the verification process of details of the laws communicated by member states, the European Commission has, up to this point, taken particular notice of issues related to compliance with the sponsorship ban.
Spain has a transitional provision whereby the ban on advertising and sponsorship for motor racing events does not apply until three years after the entry into force of the Spanish law. Italy does not apply the sponsorship ban to events that take place exclusively in Italian territory. However, according to the directive, the sponsorship ban must apply to all events with cross-border impact (for example, events transmitted to other member states via television or internet). In the case of the Czech Republic, a general three-year derogation is granted for contracts signed before the legislation came into effect.

Applying the brakes?

Hungary allows an exemption from the ban on tobacco advertising under special circumstances that relate to economically important events in Hungary, such as the Formula 1 Hungarian Grand Prix. In 2005, Parliament's health committee supported a bill on keeping tobacco ads at the country's Formula 1 event. Due to Hungary's EU membership, and because of EU guidelines to end the advertising of tobacco in member states from August 2005, last year's Formula 1 Hungarian Grand Prix was rescheduled for July 31. Finally, Parliament approved a law that gives special consideration to the Formula 1 race - citing "extraordinary economic interest."
According to a survey carried out by the Economy and Transport Ministry in 2000, foreign visitors who often combine the Hungarian Grand Prix event with a holiday in Budapest or on Lake Balaton spend an average of six nights in Hungary. This adds up to 720,000 guest nights - a significant portion of the 10 million guest nights per year that tourists spend in Hungary. Based on a daily average spending of Ft 20,000 (EUR75) per person, this amounts to Ft 14 billion per year. And bearing in mind an average VAT of 20%, the state enjoys revenues of Ft 2.8 billion from this single event alone, a study in 2000 confirmed.
"The current action taken by the EC was expected, as the directive clearly states that the tobacco ban also applies to sporting events," said Reka Markovich, secretary general of the Hungarian Advertising Association (MRSz).
She added, however, that her organization does not agree with the basic principles of the law banning tobacco advertising in Hungary.
"Regulations are far stricter [in Hungary] than anywhere else in the EU. And while it was clear that the EU directive could not be mitigated, Hungarian authorities have actually made [anti-tobacco advertising legislation] more severe. The EU ban applies to print media, radio and the internet, while the Hungarian ban is extended to movie theaters and all public areas," said Markovich.
She also claimed that no studies have ever proved a connection between tobacco advertising and an increase in the number of smokers.
"Over the next two months, we have a double task to carry out," said Judit Toth from the communication department of the Economy and Transport Ministry. "First, we have to meet the requirements of the EU directive. Second, we have to keep in mind that there is a valid contract between sponsoring tobacco manufacturers and [racetrack operator] Hungaroring Rt."
One of the sponsors of the Hungarian F1 Grand Prix, Philip Morris International, reacted diplomatically to the EC warning.
"For business reasons, Philip Morris International has decided to run unbranded during Formula 1 Grand Prix events within the EU," said Peter David, director of corporate affairs at Philip Morris Hungary Kft.
The BBJ was denied further comment regarding details of the sponsorship contract between Philip Morris International and Hungaroring Rt. According to unnamed sources, however, the contract is valid through 2011. Other anonymous sources informed the BBJ that possibly lengthy legal proceedings could prevent a full ban from legally taking effect for at least a few more years.
The European Commission is also continuing infringement proceedings against Germany and Luxembourg for failing to communicate national measures taken to implement the Tobacco Advertising Directive.
The Czech Republic, Hungary, Italy and Spain now have two months to reply to the letter of formal notice, and to bring their legislation in line with the directive. As mentioned earlier, failure to do so will result in a second phase of proceedings; and if non-compliance continues to be an issue, the EC may call upon the European Court of Justice to intervene, according to the EC's press release.

Ad Infinitum looks at current issues in the local media and advertising industries. The author can be contacted at patricia.fischer@bbj.hu

Budapest Business Journal

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