Big tobacco has exploited a loophole in Australia's world-first plain-packaging laws, which allowed smokers to ditch the now famous drab packaging.
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The Department of Health has received 1054 individual complaints involving 746 cases since the December 2012 legislation banning tobacco companies from putting their products in anything other than dark olive brown packaging that feature graphic health warnings.
Of those cases, 459 were cleared and 135 warning letters were issued, according to figures revealed in a Senate estimates hearing on Wednesday, with an ACT retailer receiving the only fine, paying $2040 for "non-compliant cigars".
But the department could not say whether Imperial Tobacco, one of the world's biggest tobacco companies, received a warning for producing what it described as a "fresher, premium product" for its Peter Stuyvesant brand which allowed customers to shed the government-mandated packaging and use a plain silver soft pack enclosed inside.
The Plain Packaging Act allows lining within the pack, but only foiled back paper, while also outlawing both inserts and onserts (a sticker that can go over existing packaging).
Departmental deputy secretary Wendy Southern told the hearing the Imperial insert, was found to be an example "where clearly we believed it as circumventing the plain packaging legislation", but there was some question over whether it constituted a breach.
"The department engaged with the manufacturer through correspondence and basically the company undertook to remove the product from the market," she said, under questioning from Labor senator Murray Watt.
"So we have one of the biggest tobacco manufacturers in the world, quite deliberately circumventing these laws and nothing happens apart from an undertaking and that's after several steps in the chain," the Queensland senator asked.
"The undertaking is to remove it from the market, which is ultimately what we were seeking," Dr Southern replied, adding that the way the legislation was crafted, there was a process of "escalation".
The legislation sets out a maximum penalty of $36,000 for manufacturers who don't comply.
A departmental spokesman told Fairfax Media the "vast majority" of tobacco manufacturers and retailers were obeying the legislation, but on the Imperial Tobacco matter there "were differing views on the compliance of the product with the legislation".
"As a result of correspondence between the department and the company which did include warnings about the consequences of continued non-compliance, the company made a decision to withdraw the product from the market," he said.
"The decision by the company to withdraw the product from the market, in this instance, avoided the potential for costly and protracted litigation with an uncertain outcome and achieved the compliance outcome sought by the department."
He said the department received reports from Imperial on the withdrawal of the packs from sale.
Shadow health minister Catherine King said there was room to revisit the landmark legislation, which was created under the Rudd/Gillard governments, saying it was "critical" the laws were enforced.
"If the government believes the laws need strengthening to do this, then Labor will work with them as a priority. Or else they should explain why companies are being let off the hook," she said.
The laws have seen early indications of success in other areas, with an Australian National University study finding calls to the quit hotlines increased by 78 per cent during the phase-in period, and sat above average for the next 10 months.
The department estimates 15,000 Australians die every year from smoking-related diseases and costs Australia more than $31 billion in social and economic costs.
