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Monday, April 27, 2015

Boycotts: Effective...And Legal

The economic weapon of the boycott has perhaps never, ever been as used nor as feared as it is today. Yet the boycott may remain a largely undiscovered, and definitely underutilized, cost-effective tool for social justice and economic warfare. Why more people don't engage in boycotts, either on their own or with groups, is puzzling.

Boycotts are effective tools to amass and deploy collective economic purchasing power to make statements and change corporate behavior. Best of all, boycotts are cheap: it costs virtually nothing to do a boycott!

Boycotts are similar in philosophy to another collective action, the use of group affinity -- ethnic, geographic, ideological -- to attract, retain and reward customers and the merchants who serve them. The major difference is that boycotts use coordinated group action, not to reward, but to punish merchants.

The philosophy of "bite the hand that hits you" was best executed, covertly and with devastating consequences, by a major insurance company about 20 years ago. The insurer gave millions in annual business to a particular New York law firm, and was hurt by new state legislation just enacted. But when that firm turned around and hired the very Governor who refused to veto that very same legislation, the insurer decided to take its very large book of business elsewhere. 

The law firm, the once-venerable Mudge Rose, closed shop soon afterwards. Later on, one of the partners of the dissolved firm tried to sue the client. Amazing. (Source: Wall Street Journal archives, 

Boycotts can also spur counter-measures, and sometimes the counter-reaction can be even more effective than the original boycott. The 2012 controversy over support by the family founders of the Chick-fil-A chicken sandwich chain restaurant for a nonprofit supporting traditional marriage spurred a boycott by same-sex-marriage activists, followed by a counter-boycott in which customers and certain groups apparently ramped up their patronage of the chain. It was reported that the chain's sales grew 12% in the year of the controversy, despite -- or is it because of -- the boycott. (Source: Huffington Post Online, available at

Both examples show the potency of domestic, individual, granular citizen action as well as the consequences for businesses which offend or attack their clients and customers. So in a society where the "e-mob" can threaten more and more reputational (if not purely economic) terror proportionately with the greater and greater size of its target, why don't we see even more boycotts, as well as affinity counter-responses?

One possible explanation is that the term 'boycott' has negative connotations because its use by industry participants to act in concert, to collude or conspire to punish or exclude others in an industry is considered anti-competitive and illegal. Such practices are considered actions "in restraint of trade" and violate federal antitrust law (Sherman Act). They may even violate state antitrust laws and both federal and state civil rights laws. 

But did you know that boycotts by individuals are actually quite legal?  In fact, the federal government approves and encourages the boycott as an activist weapon of choice.

Skeptical? Just read the transcript of remarks at the May 6, 2014 State Department Daily Press Briefing by spokeswoman Jen Psaki, which includes the following passage:
QUESTION: The second question was whether State officials stay at hotels owned by the sultan of Brunei or other Brunei entities when they travel, and what your, I guess, broader take would be on the boycotts that have been happening of such hotels in Los Angeles.

MS. PSAKI: Well, a boycott is an acceptable way, of course, for private citizens to express themselves. We don’t take a position on this specific effort. It’s our understanding that the boycott specifically targets the Dorchester Collection of hotels, which has issued a statement that it does not tolerate any forms of discrimination of any kind. As such, the State Department has no specific restrictions prohibiting an employee from staying in a Dorchester hotel.
(Emphasis added.)(Full transcript available at

The Federal Trade Commission also clearly states that individual businesses can engage in boycotts as well. The following passage comes right from the FTC's own website:

Any company may, on its own, refuse to do business with another firm, but an agreement among competitors not to do business with targeted individuals or businesses may be an illegal boycott, especially if the group of competitors working together has market power.

The FTC further clarified:

A business can always unilaterally choose its business partners.

It should be clear: People have the right to take their business away from -- in short, to punish --  merchants with whom they may disagree, and reward other merchants with whom they have an affinity (e.g., ideological, religious, ethnic). By extension, so do individual businesses acting alone in choosing with whom to transact. Individual choices are not the same as group action among businesses in refusing to transact with other targeted merchants unless certain actions or conditions are met, or at all, which actions are likely to attract the scrutiny of regulators and prosecutors looking for violations of either the Sherman Antitrust Act or any of a variety of civil rights and anti-discrimination laws.  Furthermore, any individual business should be aware as a practical matter that the greater its market power, the greater the likelihood that its behavior may be challenged legally by other market players or regulators. 

Nevertheless, choice in trade by customers is clearly a form of expressive speech, political speech even, and falls under the protections of the First Amendment. These actions should not be confused with the anti-competitive objectives of collusion among businesses to exclude competitors or attempted new entrants to a market. Individual economic choice should be seen as nothing less than Constitutionally-protected free speech.

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