Large tobacco companies differentiate their product by the look of the packaging. Australia, however, passed a law that states that all tobacco products must be sold in plain packs by December 2012.
This is a serious problem for the tobacco companies. Philip Morris is, according to this article, suing the Australian government on world trade charges.
The packaging of the cigarettes is a very affective strategy to differentiate the cigarettes from each other. This would allow each cigarette to seem falsely unique. The law will prevent this false differentiation, making the cigarette packs identical.
The firms could no longer differentiate their products through their packaging, thus making each product seem the same.
The uniqueness of each firm will diminish and demand will fall.
If the law succeeds in reducing the amount of smokers in the country, plain cigarette packaging may spread to other countries, which is a big fear for tobacco companies.
Not only is this negatively impacting tobacco companies, it will also harm tobacco exporting countries, such as Nicaragua, Dominican Republic, and Ukraine. It is logical for Philip Morris to sue the Australian government, if this law successfully passes then they would lose a significant amount of profit.