Company Information

Philip Morris International is a leading tobacco manufacturing organisation from the United States which started its operations in 1847, and since then the enterprise has expanded its operations across the globe (PMI, 2018). Since the products of the company are harmful to be consumed by the customers, the corporation has always involved in controversies. While offering its products in overseas nations, the company has to face strict legal regulations which are imposed by the governments to ensure that safety of customers.

The company operates in the tobacco industry, and it offers cigarette and other tobacco-related products to its customers.

The company has hired 554 employees in Australia to manage its operations (IBIS World, 2017).

More than 82,000 employees are working for Philip Morris International globally (Top Employer, 2018).

The headquarters is situated in New York City, United States (PMI, 2018).

There are a lot of controversies surrounding the tobacco industry as the international pressure increases regarding a ban on tobacco products. The health risks associated with tobacco products is substantially high, and in order to mitigate such risks, the governments are focusing on implementing regulations on banning and controlling the supplies of tobacco in the country. In the case of Australia, the government focuses on implementing a regulatory framework in which corporations have to follow while they establish and manage their operations in Australia. The purpose of the regulations which imposed by the government on these organisations is to ensure that they ethically operate their business while complying with competition and consumer safety compliances (Kumar et al., 2013). The competition between enterprises is crucial for the growth of a nation since it enforces organisations to offer better products and services to customers while maintaining a competitive pricing strategy. In the case of Australia, the Competition, and Consumer Act 2010 is the key legislation which provides guidelines that multinational organisations and small Australia based companies have to follow while offering their products and services in the nation. The act ensures that corporations are complying with the competition related policies while maintaining their business in Australia (Richards et al., 2012). Similarly, the Australian Consumer Law also ensures that corporations did not mislead customers by making false claims regarding their products in order to conduct fraud.

For example, section 18 of the act prohibits enterprises from making any claims regarding their products or services which are false and likely to mislead or deceive the customers. Similarly, the Fair Trading Act 1992 provides a range of compliances for multinational organisations which they have to comply with while operating in Australia. The act ensures that the multinational organisations are not trading unfairly in the country and they ensure that the small corporations are receiving enough opportunities to operate in the market as well (Austlii, 2018). A health competition resulted in increasing the overall economic growth of a country. In the case of Philip Morris International, the company complies with these two policies to ensure that it did not breach any laws while operating its business in Australia. Philip Morris International has to comply with taxation regulations in Australia as well which provides provisions regarding payment of tax on the incomes generated by multinational enterprise from their operations situated in Australia. The Australia Tax Law 2016 provides the tax regulations which apply to the operations of Philip Morris International. Currently, the government imposes a tax on the income of companies at the rate of 30 percent (ATO, 2018). This tax is paid by them on the income which they generate from their operations situated in Australia.

Industry of the Company

Similarly, the enterprise has to pay a tax on the products it offered to its customers. The Goods and Services Tax is another key taxation regulation which imposed tax on the products and services offered by the enterprises in Australia. The current GST tax rate in Australia is 10 percent based on which Philip Morris International have to pay tax on the income which is generated in the company. Since the enterprise offers tobacco related products to customers, the regulations are stricter for the company as compared to other enterprises (Jarman, 2013). Moreover, the enterprise has to ensure that it maintains a standard while offering its products to customers. The international pressure on tobacco ban is growing continuously as more and more countries join in international initiatives to ban tobacco in their respective countries. The purpose of these bans is to promote the safety of customers and establish a pollution free environment. The Australian government is a key player in these initiatives, and the enterprise has joined hands with the World Health Organisation (WHO) to increase awareness between people regarding the negative health consequences of tobacco products (Wilson et al., 2012). The government has been enacting laws relating to ban on tobacco and related products for several decades. For example, Philip Morris International has to put graphic images on its cigarette packs which showcase the risks associated with smoking.

The purpose of these graphic images is to reduce the number of people who smoke by highlighting its negative health consequences. The media in Australia is also putting pressure on Philip Morris International to comply with the legal regulations strictly or else the enterprise has to face serious issues relating to its brand image and financial penalties. As per the legislative regulations relating to tobacco, the company has to put graphic warning signs on cigarette packets which cover 75 percent of the front area of the product and 90 percent of the back area (Legislation, 2018). Furthermore, Philip Morris International has to comply with the Competition and Consumer (Tobacco) Information Standard 2011 which provides guidelines relating to cover the cigarette packets with graphic images in order to increase awareness between people regarding adverse health implications of smoking and tobacco use. Thus, there are a number of regulations which imposed by the government of Australia on multinational enterprises. Similarly, these regulations implemented on the operations of Philip Morris International and the company has to ensure that it effectively comply with these regulations to avoid legal consequences (Adkison et al., 2013). The legal framework which implemented by the government of Australia on the operations of Philip Morris International focuses on ensuring that the enterprise is not promoting its products in any way to increase the number of smokers in the country.

The treaties are referred to agreements relating to international laws based on which sovereign states and international organisations enter into agreements for different purposes. Generally, the objective of trade treaties constructed between enterprises is to create new trading relationships between different nations. It brings more foreign investments to the country which contributes to the economy of the country. The trade treaties bring new employment opportunities in the nations and improve the overall living standard of citizens. The Australian Government has formed various treaties and agreements with other nations in order to encourage trading practices between both nations to support the economy of the nation. These treading treaties create employment opportunities for Australian citizens while at the same time improve their living standard (Kirchner, 2012). These treaties have both favourable and adverse impact on the operations of Philip Morris International while managing and expanding its operations in different nations which have entered into trade treaties. Philip Morris International provides its products in both Australia and New Zealand; therefore, the treaties formed between these two nations affect its business operations. Both nations have entered into a treaty titled Australia New Zealand Closer Economic Relations Trade Agreement (ANZCERTA). This is a key treaty which is signed between both nations with an objective to create business ties and relationships which support the economic growth of both countries (Elms, 2013).

Number of Staff in Australia

Due to this treaty, both nations are able to improve the overall living standard of their citizen by providing them employment opportunities and better healthcare support. However, in the case of Philip Morris International, the company offers tobacco-related products which are unhealthy for customers, and they cause serious health issues as well. Thus, both nations impose heavy taxes and fee on the products of Philip Morris International in order to minimize their usage in the country in order to maintain the health of their citizens. In New Zealand, the government has imposed ‘Smoke-Free Environment Act’ which is focused towards reducing the pollution in the country due to which the government puts a ban on the heated products offered by Philip Morris International to its customers (George, 2018). The government and the organisation were involved in a suit in which the court gave judgement on Philip Morris International side. Based on the judgement, the government of New Zealand has to remove the ban from the products of Philip Morris International since the enterprise did not breach any laws. Another key treaty which creates difficulties for Philip Morris International is ASEAN Australia New Zealand FTA (AANZFTA). Although the objective of this treaty is to create new trade ties between the two nations by encouraging and supporting the trade practices of small and multinational companies (Frater, 2014).

However, since Philip Morris International operates in the tobacco industry, the enterprise has to pay heavy taxes on the products which it offers to its customers. Furthermore, the corporation has to maintain a standard while manufacturing its products in order to minimize the negative impact on the health of users. The regulatory framework for Philip Morris International is complex than compared to other organisations because the government is continuously forcing the enterprise to pay heavy taxes or put a ban on its operations. For example, the government of Australia and Hong Kong have entered into a bilateral trade agreement based on which the government removes various restrictions from the companies while they operate in either nation (Human Rights, 2015). Based on these regulations, Philip Morris International wanted to avoid putting graphic signs on its products while they are offered in Australia. However, the Australian government wanted the enterprise to cover 75 percent of the front and 90 percent of the back area with graphic images of warning signs. The company argued that as per Australia’s Investment Promotion and Protection Agreement, the enterprise did not have to put such signs on its products while they are offered to the public (Chapman, 2015). A suit was filed by the company in the court, and the judgement was given in favour of the Australian Government.

The court provided that the World Health Organisation’s Framework Convention on Tobacco Control prevails over the terms of the treaty signed between both nations because they are in the interest of the public (Gilmour et al., 2015). Thus, the court ordered Philip Morris International to put the warning signs on the cigarette packets of the company. Furthermore, Philip Morris International is primarily based in the United States, thus, the FTA treaty signed by the government of Australia and the United States assisted the enterprise in expanding its operations in both countries. This treaty is signed by these nations in order to improve their trade relationships while at the same time supporting the overall economy of the nation. However, Philip Morris International has to comply with a stricter regulatory framework than compared to other organisations because the enterprise offers tobacco related products to its customers (Kirchner, 20112). The Australian governments ensure that the tobacco organisations which offer their products in the nations have to pay heavy charges in tariff and other fees. Thus, it results in increasing the prices of the products offered by Philip Morris International in the country which resulted in affecting its profitability. Therefore, the treaties signed between nations affect the products and services offered by Philip Morris International in Australia.

References

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Elms, D. (2013) The Trans-Pacific Partnership: The challenges of unraveling the noodle bowl. International Negotiation, 18(1), pp.25-47.

Frater, C. (2014) International economic law. New Zealand Yearbook of International Law, The, 12, p.200.

George, D. (2018) Court dismisses charges against Philip Morris over sale of non-burning tobacco sticks. [Online] Available from: https://www.stuff.co.nz/national/102647281/court-dismisses-charges-against-philip-morris-over-sale-of-nonburning-tobacco-sticks [Accessed 30/08/2018].

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Human Rights. (2015) Philip Morris international arbitration (re Australian plain packaging law). [Online] Available from: https://www.business-humanrights.org/en/philip-morris-international-arbitration-re-australian-plain-packaging-law [Accessed 30/08/2018].

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