Reclaim Democracy!

Archives for December 2003

Monsanto v. Oakhurst Dairy

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Does Monsanto Corporation Have the Right to Keep You from Knowing the Contents of Your Food?

By Kristen Philipkoski
First published in Wired Magazine

Updates. April 3, 2007: Monsanto Inc. filed a complaint to the US Food and drug Administration, asking it to ban labels identifying products as coming from cows not injected with artificial hormones.

Dec. 24, 2003: Monsanto Inc. and Oakhurst Dairy settled Monsanto’s lawsuit out of court today. Under the agreement, Oakhurst will use labels that read, “Our Farmers´ Pledge: No Artificial Growth Hormone Used.” Its previous label did not have the word “used.” But the labels also will note that the FDA claims there is no significant difference in milk from cows treated with growth hormones.

In a prepared statement, the companies said the conditions and terms of their agreement are confidential. Company officials declined further comment.

The calls from distressed dairy farmers come nearly every day, and John Bunting does what he can to help.

A mother of 14 tells Bunting that her husband feels like a failure because he can’t provide for his family on milk sales alone. Another farmer says he had to sell one of his cows to repair a broken tractor. They know Bunting, who talks to them on a cordless phone while milking his cows, will lend a commiserative ear. He might also write about them in Milkweed, the dairy publication to which he is a contributor.

By some accounts, the past 18 months have been the worst in history for the U.S. dairy farmer. Milk prices have not increased enough to adjust for inflation in the past decade, and many family dairies have shut down. Sick cows don’t get treatment because farmers can’t afford a vet, or, worse, the vet won’t come anymore because he didn’t get paid last time.

Many small farmers place much of the blame on agribusiness giant Monsanto and a bovine drug called Posilac the company sells to increase the amount of milk a cow can produce.

Some farmers say that Posilac, also known as recombinant bovine somatotropin, only adds to an already glutted milk supply, which drives down the price paid to farmers. But Monsanto says the drug can get farmers out of a slump by helping them produce more milk.

“Producing more milk efficiently allows dairy farmers to make more money,” said Jennifer Garrett, technical services director for Monsanto’s dairy business. “The farms with the highest-producing cows are those that are making the most money. Posilac is a product that allows them to do that.”

Many dairy farmers say, however, that not using the hormone is one way they can get a competitive edge. Some milk distributors pay a premium for milk from cows not treated with rBST. Plus, even though studies show rBST is safe for humans, increasing numbers of consumers are drawn to “all-natural” products.

Farmers who don’t use rBST want to advertise that fact on their product labels. But Monsanto officials say labels like “No rBSTv” or “rBST-free” are misleading, unfair and deceptive. The company has recently sued one dairy for its labels.

Oakhurst Dairy in Maine labels its milk: “Our farmer’s pledge: no artificial hormones.” Monsanto’s lawsuit says the label implies Oakhurst’s milk is somehow better than milk from cows treated with rBST, and that unfairly harms Monsanto’s business.

A federal judge in Boston has set a trial date for Jan. 5, 2004, but denied Monsanto’s request for a hearing to argue that Oakhurst should stop its labeling immediately, pending the trial’s outcome. Monsanto isn’t seeking monetary damages; its lawyers just want Oakhurst to remove the label. Oakhurst officials say they have no intention of doing so.

“We intend to defend our right to, through our labeling, let consumers know what is and what is not used in the production of the milk they drink,” said Oakhurst President Stanley Bennet.

Approximately 17 percent of U.S. dairy operations use rBST, or 32 percent of all cows, according to the USDA– most of them large farms that house thousands of cows.

The drug is made of an isolated gene from the growth hormone that cows produce when they lactate. The gene is inserted into an E. coli bacteria to make it grow rapidly in vats. Injections of the product make the cows produce more milk each day and lactate longer. Farmers say the average increase in lactation time is about 30 days, but it can go much higher. One farmer milked a cow for 1,155 days straight. Most cows produce about 25 percent more milk than they would without injections.

Large dairy farmers like Don Bennink, owner of North Florida Holsteins in Bell, Florida, swear by rBST. He has about 3,700 cows.

“(Posilac) certainly requires a certain amount of management, but it’s been very beneficial to us,” he said, because even though the price of milk is low, he’s been able to sell more of it. “This has been a rough year for the dairy business, but on the whole I think we’re considered very successful.”

John Vrieze, who owns 2,600 cows at the Emerald and Baldwin dairies in Baldwin, Wisconsin, says rBST has even saved some cows’ lives, or at least extended them, because he can milk them longer before shipping them off to the slaughterhouse.

But many smaller farmers choose not to spend the time and $5.25 per injection to use Posilac, which must be administered every two weeks after a cow begins to lactate.

Besides the time and cost, they also forego rBST because they don’t like the side effects the hormone has on their cows. A 1999 Health Canada study found Posilac increased a cow’s risk of mastitis (udder infection) up to 25 percent, which leads to more somatic cells, or pus, in the milk.

The study also found the drug increased cow infertility by 18 percent, and lameness by up to 50 percent. Based on the data, Canadian officials did not to approve rBST.

For those same reasons, the hormone is not approved in the 15 European Union countries, Australia, New Zealand and Norway. It is approved in 19 countries including Brazil, South Africa, Pakistan and the United States.

The drug has increased the price of cattle, said Joaquin Contente, a dairy farmer and president of the California Farmers Union.

“When it came out in 1993 I predicted that this was going to make cattle prices high, because it’s something that is not very healthy for the cows themselves because it stresses them out,” Contente said.

Despite the proven side effects on cows, there is no reason to believe the hormone is harmful to humans. The FDA approved rBST in 1993. By then, various researchers had found the hormone was not biologically active in humans. In one study, scientists injected rBST directly into patients, hoping to cure dwarfism. It had no effect.

Citing this and other studies, the FDA said rBST was safe. The agency also said Monsanto was not obligated to provide a test to detect whether milk came from a cow treated with rBST.

To certify that its cows are rBST-free, Oakhurst relies on affidavits signed by farmers promising not to use the hormone on their cows. Oakhurst President Stanley Bennet thinks that’s enough assurance (“If you can’t trust a Maine dairy farmer, who can you trust?” he said), but others say a test would be a more concrete guarantee.

“You could see how (a test) could be useful,” said Susan Ruland, a spokeswoman for the Milk Industry Foundation, a section of the International Dairy Foods Association. “The irony is we have situations where there is actually no way to back up if a company (uses) a label saying ‘this is from nontreated cows.’ They’re going on the word from their farmers.”

Monsanto says it’s impossible to develop a test to determine if milk is from cows treated with rBST because the milk is exactly the same as any other milk. However, a Cornell researcher says he has the technology to do it.

Ron Gorewit patented the technology for a test in 1995. He says corporate politics have stifled his efforts to develop an FDA-approved test.

Sure, milk from rBST-treated cows may be perfectly healthy for human consumption, Gorewit said. But he also believes that savvy consumers have the right to know how their milk is produced.

“I strongly believe that people should know what they’re consuming,” Gorewit said. “Let them choose what they’re going to eat or drink.”

He has not, however, been able to raise the approximately $200,000 it would take to develop an FDA-approved version of the test.

The tenured Gorewit worked with Dale Bauman at Cornell in the early ’90s to develop rBST for Monsanto. Gorewit went on to develop a test to detect milk produced using the hormone. But his colleagues did not support his efforts, and his relationship with Bauman soured.

Bauman, who did not respond to a request to be interviewed for this story, wrote a memo to the press denouncing Gorewit’s test. Meanwhile, Monsanto officials also say they believe creating such a test is pointless.

“Even if there ever were a measurable amount of recombinant BST present in the milk, it has no biological activity in humans anyway,” Garrett said. “The milk is the same wholesome, nutritious product that it’s always been, with or with out the use of Posilac.”

Still, Gorewit stands by his work.

“A test for rBST can be developed,” he said. “The technology to do this is now available, whether Dr. Bauman wants to believe it or not.”

Scientific journals in the United States shied away from his research, Gorewit believes, for fear of irritating Monsanto. He eventually published his work on the test in a Pakistani medical journal. The study details the ability to measure the activity of a fatty-acid-binding protein in milk from cows receiving rBST.

Since no test is approved to detect a difference between milk from cows treated with hormones and any other milk, the FDA issued guidelines in 1994 stating that no dairy should claim its milk is better because it came from rBST-free cows. Monsanto officials say the Oakhurst lawsuit is based upon these guidelines.

But critics believe the FDA took its cue from Monsanto back in 1994 when Michael Taylor wrote the guidelines. Taylor came to the FDA from the law firm King & Spalding, which authored the Oakhurst lawsuit and still represents Monsanto. He went on to work for the USDA and later served for 16 months as vice president for public policy at Monsanto.

An FDA representative did not return phone calls requesting comment for this article.

Meanwhile, the appeal of using no-rBST labels is growing. Horizon, a large organic dairy producer in Boulder, Colorado, also employs “no rBST” labels, as does Berkeley Farms in California. Ben and Jerry’s ice cream, Stonyfield Farms, Whole Foods markets and Organic Valley Farms all label their non-rBST products as such.

Those four companies joined in a 1997 lawsuit against Illinois for the right to voluntarily label their products. The matter was settled out of court. They still label their milk, but they include a warning saying “the FDA has found no significant difference between milk from recombinant hormone-treated and untreated cows,” per the 1994 FDA guidelines.

On Friday, Sept. 12, the FDA warned several dairies to stop using “no hormone” labels, saying that all milk contains naturally occurring hormones and the product is therefore mislabeled.

Critics wonder whether Monsanto will also want to change kosher and organic labels. Monsanto says that’s different.

“The purpose of organic standards is to establish a set of production and processing criteria to market foods labeled as organic, not to suggest organic foods are ‘healthier,’ ‘safer’ or of ‘higher quality’ than other foods currently available on supermarket shelves,” Monsanto spokesman Lee Quarles said in an e-mail.

Oakhurst’s labels don’t specifically make such claims, but the Monsanto lawsuit says they’re implied.

“We make no claims at all as to other milk,” Bennett said. “All we state in our advertising on our trucks and on our labels is that our farmers pledge that they will not use artificial growth hormones on their cows.”

Meanwhile, Bunting believes the way to remain a dairy farmer and keep his sanity as well as the family farm is to sell milk products like yogurt and curd directly to customers rather than through stores. He will soon apply for a license from the state to do so.

“The price of milk is so ridiculously low you simply can’t wholesale your milk,” he said.

© 2003 Wired Magazine

Related Feature: Negative Free Speech for Corporations: Why Monsanto Can Prevent You from Knowing the Origins of Your Food

For those seeking more information on rGBH, ejnet.org has links to a wide array of information

Capsule Book Review: Overruling Democracy The Supreme Court vs. the American People

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by Jamin B. Raskin (2003)

We were excited by this book because we work directly on many of the issues American University law professor Jamin Raskin highlights in this book, including amending the Constitution to deny corporations the status of persons, establishing a Constitutional right to vote, and creating open and democratic presidential debates.

Raskin provides sharp analysis and more detail on such issues that we’ve covered briefly in our online articles and newsletter, though Raskin does so from an unabashedly liberal perspective. He also covers several other engaging topics under the broad theme of the Court’s growing opposition to, and supression of, democracy in the past several decades.

The only major disappointment was the absence of direction to organizations and concrete actions for people to engage in constructive change. That’s no problem for visitors to our site, who can easily find such resources on our links and primers pages, but for casual readers it may be a significant omission we hope will be filled in future printings.

Overruling Democracy is informative and a fast read that provides a great introduction to many key constitutional issues.

The ACLU on Commercial Speech and Kasky v. Nike

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(and our responses to ACLU claims)

The ACLU statement appears as published on ACLU.org (2003)

Editor’s Note: While this statement was written by the ACLU’s Northern CA chapter, the national headquarters directed people to it as representing the national ACLU’s position on Kasky v. Nike. The ACLU statement is followed by our rebuttals to specific points.

While we are grateful for the ACLU’s work in defense of civil liberties, we urge its directors to reconsider what we consider counter-productive advocacy to advance “corporate free speech” and the concept that spending money to influence elections is free speech (more on that topic).

The ACLU is often asked why we file a brief in support of a controversial speaker. That is the case with our brief in Kasky v. Nike, Inc., which was recently decided by the California Supreme Court. Our main concern in cases like Nike is to ensure that important First Amendment protections are not eroded because the speaker or the speech in question is unpopular or controversial. Thus our brief was not about the merits of the controversy surrounding the conditions under which Nike’s products are manufactured nor did it take a position on whether or not Nike’s statements in defense of its business practices were accurate. Rather, the purpose of our brief was to assure that the question of the truthfulness of Nike’s assertions was judged by the same set of rules that would apply were someone to question the truthfulness of the assertions of its critics.

The actual question before the Court in Nike was whether a specific set of statements that Nike made in a specific set of documents should be considered commercial speech (i.e., advertising) that is entitled to a lower degree of First Amendment protection than the protection accorded to the statements of its critics made in comparable documents. We filed a friend of the court brief arguing that, on the particular facts of the case, Nike was entitled to the full protection of the First Amendment in responding to the criticism leveled at it by others. Although the California Supreme Court ultimately held that Nike’s statements should be considered commercial speech, we believe that the Court’s decision is inconsistent with fundamental First Amendment principles that protect the rights of those on both sides of a debate to speak their minds freely on issues with ramifications that go beyond the simple question of whether or not to buy a particular product.

The statements in question in this case were made in a letter to the editor of the New York Times in response to one of a series of columns about Nike written by Bob Herbert; a letter to the CEO of the YWCA; a letter to a human rights organization; letters to the presidents and athletic directors of colleges and universities; and a group of lengthy, detailed press releases. These letters and press releases were a direct response to a series of newspaper articles, television programs, and newspaper columns, all of which were highly critical of the conditions under which Nike’s products are manufactured abroad. Nike’s statements were not what one ordinarily thinks of as advertising. Letters to an organization that are part of an ongoing written discussion and letters to the editor are qualitatively different from a label on a pair of shoes. Similarly, press releases are not comparable to ordinary advertisements. Unlike an advertisement, press releases are not printed verbatim. The most one can usually hope for in sending out a press release is that the media, after evaluating the press release, will present your side of the story at the same time that they report your opponents arguments. By writing letters, including the letter to the editor of the New York Times, and by issuing press releases, Nike was responding in the same places in which it had been the subject of criticism and in which the debate about its practices was going on. The intended audience was the general public that had read the newspaper articles and columns and seen the television shows that had criticized Nike—whether or not these members of the general public were also potential buyers of Nike’s products.

The ACLU took the position that, in this context, Nike’s statements could not be considered commercial speech. Nike was taking part in a public debate in the public forum within which the debate was occurring. To provide full First Amendment protection to the speech of its critics while providing reduced First Amendment protection to Nike’s speech is inconsistent with First Amendment values that seek to maximize the opportunity for both sides of the debate to be heard so that the public, not the government, can decide who is right and who is wrong.

If we accept the logic that speech that furthers the economic interests of a company is always commercial speech aimed at consumers, because the “general public” is by definition made up of “consumers,” then businesses will never be able to speak freely, because anything they say on any subject affecting their business interests will, inevitably, affect whether some consumers will want to do business with them. This is as true for companies that speak out in defense of business practices and policies that we applaud, such as the need for a diverse workforce, as it is for Nike. It was for this reason that the ACLU argued that there is an important difference between speech that is directed primarily to consumers, and speech that is directed at a broader audience that occurs in the context of a public debate on broader issues of public concern.

Interestingly enough, Bob Herbert, the New York Times columnist whose columns Nike was responding to when it sent its letter to the editor, takes the same position on this question as does the ACLU. He wrote a column on May 13, 2002, arguing that Nike’s statements should not have been treated as commercial speech.

It has always been a cornerstone of the First Amendment that, when presented with both sides of an argument, the people can, by and large, be relied on to separate the wheat from chaff in evaluating conflicting claims on issues of public importance. While it may not always be a perfect system, it is far better than one in which the government becomes the arbiter of truth, thereby silencing one side of the debate. Where, as here, both sides of the debate are, indeed, being heard, the outcome of the debate should be judged in the court of public opinion, not in a court of law.

 

Our response to points raised by the ACLU

“The ACLU is often asked why we file a brief in support of a controversial speaker…Our main concern in cases like Nike is to ensure that important First Amendment protections are not eroded because the speaker or the speech in question is unpopular or controversial.”

The opening sentence simply diverts attention to a non-issue. 1. No party in this case argues against controversial views being expressed. 2. Being non-controversial is not a requirement for enjoying the protections of the First Amendment–being human, however is indeed a valid condition. There is no Constitutional or common sense basis for bestowing Bill of Rights protections upon corporations.

“The actual question before the Court in Nike was whether a specific set of statements that Nike made in a specific set of documents should be considered commercial speech (i.e., advertising) that is entitled to a lower degree of First Amendment protection…”

This statement frames the issue as merely a matter of whether or not the speech is “commercial” or not and focuses only on the content of the communication and the medium through which it is delivered, without regard to the source of the message. The corporate, non-human source of the PR campaign is the critical matter. Also, the statement equates commercial speech with advertising, but communications need not be ads referring to specific products to attempt to influence the actions of potential customers (and therefore be commercial speech), as Nike’s PR campaign obviously was intended to do.

“…we believe that the (California Supreme) Court’s decision is inconsistent with fundamental First Amendment principles that protect the rights of those on both sides of a debate to speak their minds freely…”

Exactly whose mind is the ACLU referring to here? A corporation is a legal construct, not a living and thinking being. Nike executives would, of course, be free to say what they like as individuals with full Constitutional protection. Different standards can and must apply when they are carrying out the business of the company, acting as a tool for exercising the power of a multi-billion dollar corporation.

“To provide full First Amendment protection to the speech of its critics while providing reduced First Amendment protection to Nike’s speech is inconsistent with First Amendment values that seek to maximize the opportunity for both sides of the debate to be heard so that the public, not the government, can decide who is right and who is wrong.”

Again the writer presumes that corporations enjoy equal standing with human beings and that the corporation constitutes the “public” whose rights must be protected from the government. In so doing, the ACLU not only ignores the fact that corporations are not people, it also ignores the fact that corporations are artificial creations that owe their very existence to the government.

Given that they are created by government, it is perfectly reasonable that corporations should be under the control of the political process rather than be empowered to influence or control it. In fact, given the many special powers and privileges that the government grants corporations (e.g. limited liability, perpetual lifespan, etc.), it is imperative that they be subject to such control lest they threaten to overpower the democratic process itself.

As justices White, Brennan and Marshall pointed out in their dissent in First National Bank of Boston v. Bellotti (1978), “the special status of corporations has placed them in a position to control vast amounts of economic power which may, if not regulated, dominate not only the economy but also the very heart of our democracy, the electoral process.” They recognized that restricting corporate communication was necessary because “The State need not permit its own creation to consume it.”

“Nike’s statements were not what one ordinarily thinks of as advertising.”

Again, this diverts from the question at hand and misrepresents the question as one of whether or not the communications were advertisements. No one made claims to the contrary about some items in question, such as letters to university presidents (although they are among Nike’s biggest customers). Items in Mr. Kasky’s complaint, however, included full-page paid advertisements in the New York Times among the communications alleged to misinform–a fact that Nike and the ACLU conceal from the public.

“The ACLU took the position that, in this context, Nike’s statements could not be considered commercial speech.”

A publicly traded corporation such as Nike is legally mandated to maximize shareholder return. They do it by selling goods. To argue that Nike Inc. expended resources to influence public opinion for an ultimate purpose other than furthering profit is more than merely silly–it effectively accuses the company of illegal behavior. This point is key to understanding corporations. Does the fact that Nike’s communications attempted to sell the corporation’s image and all its products, rather than a specific product, make it any less commercial? If so, a great many of Nike’s ads are “non-commercial,” since so many sell an image rather than the product directly.

“…maximize the opportunity for both sides of the debate to be heard so that the public, not the government, can decide who is right and who is wrong…”

California has a law against consumer fraud precisely because it is impractical, if not impossible, for individual citizens to research Nike’s claims. It is up to the California courts to decide whether the plaintiff’s charges are valid. This dispute is now a legal matter, not a popularity contest.

“If we accept the logic that speech that furthers the economic interests of a company is always commercial speech aimed at consumers, because the “general public” is by definition made up of “consumers,” then businesses will never be able to speak freely…”

The question to be decided in Kasky v. Nike is whether Nike Inc. has a right to lie, while violating state laws and then claim immunity from prosecution as a corporate “person.” An accurate rewording of the ACLU’s statement would be “then businesses will never be able to lie freely and with impunity from democratically enacted laws.”

“Bob Herbert, the New York Times columnist whose columns Nike was responding to when it sent its letter to the editor, takes the same position (as ACLU).”

Mr Herbert is entitled to his opinion, but we’re not persuaded by celebrity endorsements unless they have a compelling argument. You can read Mr. Herbert’s on our site and evaluate his case for yourself. We also wish Mr. Herbert walked his talk of supporting free speech. After his employer published both his pro-Nike piece and its own concurring editorial, while barring any dissenting opinions from its editorial page, Herbert refused requests to encourage his bosses on the opinion page to allow readers to hear the other side of the story.

“…when presented with both sides of an argument, the people can, by and large, be relied on to separate the wheat from chaff in evaluating conflicting claims…”

Could the ACLU board really believe that individual citizens or non-profit organizations are on a level playing field with transnational corporations when it comes to influencing public opinion? We doubt that their members would agree. How many people died because tobacco corporations used their overwhelming monetary power to create doubt about the fatal effects of smoking for decades afer all scientific doubt was gone?

While it may not always be a perfect system, it is far better than one in which the government becomes the arbiter of truth, thereby silencing one side of the debate.

Citizens have a right to expect the absence of deliberate or reckless untruth in corporate communications. To equate requiring that a multi-billion dollar corporation not deliberately deceive the public with “silencing” it is hyperbole unworthy of the ACLU and a twisted representation of the issue–help the ACLU do better.

Return to Nike v. Kasky index page

Stop Calling It “Free Trade!”

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December, 2003

Americans swarm to anything that’s free–both literally and rhetorically–so corporate PR departments naturally employ rhetoric like “free trade” and “free markets” to advance their agendas. But it’s a mystery why opponents of trade agreements that elevate corporate interests above democracy concede the terms of debate by calling for “fair trade, not free trade.”

International trade agreements erect trade barriers as often as they remove them. As Wayne Andreas, CEO of agribusiness giant Archer Daniels Midland, said, “There is not one grain of anything in the world that is sold in the free market. Not one. The only place you see a free market is in the speeches of politicians.” Well acquainted with both illegal price fixing and legally wielding political power to extract taxpayer subsidies, Andreas knows of what he speaks.

Not only do treaties like the proposed FTAA outlaw forms of protectionism that serve the public interest–such as safeguards for healthy air, drinkable water and a safe workplace–they also preclude or destroy competition in many business realms.

A driving force behind most existing and proposed trade agreements is politically-powerful corporations’ pressure to expand the most costly and anti-competitive forms of protectionism–patents, copyrights and other monopolies grouped under “intellectual property rights.”

Many such rights are essential to ensure writers, researchers, musicians and others receive just compensation for their work. Often, however, what’s patented is taxpayer-funded research. Rather than benefiting the public, it is given away or sold for a pittance to corporations that reap huge profits under trade agreements that internationalize their monopoly on a product.

Take the hotly-debated prescription drug market. According to a 1995 Massachusetts Institute of Technology* study, eleven of the 14 most medically significant drugs developed in the United States between 1970 and 1995 originated with government-funded research.

$500 million in public money funded research and testing for Taxol (the best-selling cancer drug ever), beginning in the 1960s–decades before its commercial debut.

So what return did taxpayers get from this potentially lucrative investment that could have reduced our taxes or made cancer treatment affordable to all? Nothing.

Actually, worse than nothing.

First, the National Institutes of Health granted exclusive production rights to Bristol-Myers Squibb Inc. for a pitiful 0.5% royalty. Then Americans paid the corporation $687 million between 1994-1999 alone for Taxol purchases via Medicare at markups that would make street drug dealers blush–up to 2000 percent over production costs! Such profit margins would be impossible without the government-created monopoly that resembles corporate socialism more than a free market.

Meanwhile, we’ve collected just $35 million in royalties, and Squibb executives gain more through investments in politicians than Taxol research. And while import tariffs rarely increase product prices more than 25 percent, patent-protected monopolies can gouge us for 20 times the cost we’d see in a free, competitive market. Thus pharmaceutical manufacturers enjoy a stunning median profit margin of 17 percent–more than five times the median for Fortune 500 industries.

Imposing these obscene profit margins abroad (through trade pacts that poor countries often have little choice in signing) effectively mandates suffering and death to bolster corporate profits in many instances. For example, poor countries that import generic AIDS drugs that save thousands of lives have been sued to halt the practice as a violation of trade treaties.

Such market distortions aren’t unique. From another angle, the Consumers Union recently issued a detailed report showing that independent pharmacies beat chain competitors in price, service and overall satisfaction. So why have more than 10,000 independent pharmacies disappeared since 1990?

In addition to massive advertising power to falsely convince shoppers that those chain stores provide better value, government discrimination again is a major factor.

Congress forbids states from letting local businesses compete against mail order or Internet vendors in a free market by prohibiting states from collecting sales tax from remote vendors on interstate sales. So in 45 states, a community-serving business competes against an effective federal handicap that averages 8.3 percent of a product’s cost.

Amplifying such handicaps are corporate actions like that of the “big three” U.S. automakers inserting last-minute language into the United Auto Workers’ latest contract that says workers’ insurance will cover only mail-order prescriptions.

Another recent report noted that Pennsylvania’s health plan for state workers mandates that they fill prescriptions at Rite Aid or via online vendors. The automakers and the state government may save a few dollars, while their employees lose important personal service and communities lose irreplaceable businesses.

Where are those politicians and “free market” think tanks that object loudly to “limiting choice” or advocate for “states rights” when it’s small businesses who are disadvantaged? Apparently they don’t like to confront the fact that political power now determines which markets will or will not be free.

“Free market” mythology aside, the core reason for citizens to reject any new trade agreements that expand corporate power is the creation of international commerce rules that trump democracy. But in doing so, citizens should not concede the false premise of these pacts being about “free trade.”

We should shift debate to democratic terms and reject language that stacks the deck against us. Distinguishing theoretical free markets from our reality of corporate capitalism would be a fine place to start.

Wal-Mart, the Abuse of Eminent Domain and Corporate Welfare

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By Stacy Mitchell
Published December 2003

Typical of shopping centers built decades ago, Alameda Square in Denver is a cheap, single-story strip of stores. It’s ugly and rundown. But that does not deter shoppers. Mostly Asian Americans, shoppers come from miles around to patronize more than a dozen locally-owned Asian businesses, including two grocery stores, two restaurants, a hair salon, a clothing shop, a jeweler and a bakery.

On a weekday afternoon, the parking lot buzzes with activity. Inside Pacific Ocean International Supermarket, the dingy exterior gives way to bright lights, shelves stocked with canned bamboo shoots and dried fish and aisles of shoppers.

Most of Alameda Square’s businesses are profitable. Together they generate about $125,000 a year in sales tax revenue. But if the city of Denver has its way, these small businesses will be evicted to make way for a Wal-Mart super-center. The city’s Urban Renewal Authority has threatened condemnation if the property owners refuse to sell and has offered Wal-Mart $10 million in public subsidies. That’s right: Tax dollars would go to one of the country’s most profitable and powerful corporations.

Because they lease their spaces, the storekeepers will receive little compensation. The city has offered to help them find new locations, but it is unlikely they will end up together, which has been key to their success as a regional destination for Asian shoppers. Some, like Kings Land Chinese restaurant, which books weddings months in advance, are already losing business.

As big chains like Wal-Mart have grown and multiplied over the last decade, tens of thousands of independent businesses have closed. Most people assume that local retailers are being beaten fair-and-square by companies that offer consumers a better deal.

But as Alameda Square vividly illustrates, consumer choices are not all that’s driving the growth of corporate chains. Public policy plays a major role.

Wal-Mart leads the pack in attracting subsidies, this year collecting $10 million in Denver; $500,000 in Dallas; $36.7 million in Scottsdale, Ariz., (as part of a shopping center that includes Lowe’s); $9 million in Bartlesville, Okla.; and $17 million in Lewiston, Maine.

Local officials argue these big stores warrant subsidies because of the jobs and tax revenue they generate. But in most cases the big boxes do more harm than good.

Chris Nevitt, director of the Front Range Economic Strategy Center, one of several groups in Colorado fighting Denver’s plan for Alameda Square, points out that nearby grocery stores and competing businesses will lose sales to Wal-Mart.

“As these businesses shrink or close, hundreds of jobs will be lost, many of which provide higher wages and better benefits than Wal-Mart,’ he argues. Moreover, under the terms of the subsidy, Denver will not see a dime of new revenue until 2016.

Rarely are tax dollars given to local retaiiers. For them, it’s sink or swim in a sea of giant, subsidized competitors. When asked how Scottsdale’s small businesses were to survive the arrival of Wal-Mart and Lowe’s — slated to receive the second largest corporate subsidy in Arizona history — city councilor Ned O’Hearn declared, “That’s urban dynamics. This is private enterprise. This is competition.”

Yet taxpayers pick up the tab for corporate chains by bridging the difference between what their workers earn and what they need to survive. Half of Wal-Mart’s employees qualify for food stamps. Many rely on other forms of public assistance. Washington state reports that Wal-Mart workers are the single largest group of users in its low-income health care program.

Some cities have gone so far as to condemn property owned by small businesses in order to turn it over to chain store developers. Last month, Wheat Ridge, Colo., designated property owned by three independent businesses as blighted. The three enterprises—a multi-generation, family-owned automotive repair shop, a billiards hall, and a kitchen cabinet business—will be booted for a Walgreens drugstore. The developer has also been given $500,000 in public subsidies.

Tax policy, too, is riddled with loopholes that benefit chain stores. As the Center on Budget and Policy Priorities has documented, about half the states allow national chains to avoid state income taxes by transferring profits earned locally to tax-free states such as Delaware. Small businesses, meanwhile, pay state income taxes on every penny of their earnings.

All of this adds up to a startlingly tilted playing field, a rigged system that can hardly be characterized as free enterprise. Our hometown businesses deserve better.

Stacy Mitchell is the author of The Home Town Advantage: How to Defend Your Main Street and Why It Matters (highly recommended and also for sale on our site).  She is a senior researcher with the New Rules Project.

Drug Patents, Corporate Profits and AIDS Deaths

by

By Joanne Mariner
First published by FindLaw.com, November 26, 2003

Here are some numbers to consider: 14 million, 35.9 billion, and 1.

The first is an estimate of the number of people who will die of AIDS and other treatable diseases over the course of the coming year, most of them in the poor countries of the developing world.

The second figure represents the combined 2002 profits, in dollars, of the 10 biggest pharmaceutical companies listed in Fortune magazine’s annual review of America’s largest businesses.

The third figure corresponds to the number of countries that, last week, voted against a U.N. resolution on access to drugs in global epidemics such as HIV/AIDS, tuberculosis and malaria. The resolution emphasized that the failure to deliver life-saving drugs to millions of people who are living with HIV/AIDS constitutes a global health emergency. One hundred sixty seven countries voted in favor of the resolution. The single vote against it was cast by the United States.

Sadly, these numbers are closely related. To protect their exorbitant profits, drug companies are fighting the production and distribution of cheap generic versions of patented drugs. Unable to afford the medicines that could save their lives, millions of poor people around the world die of treatable illnesses every year.

And, as the recent U.N. vote exemplifies, the drug companies have a reliable ally. Not only does the U.S. government use its considerable economic power to bully developing countries into restricting access to low-cost generics, it continues to try to change the international rules that allow such generics to be made in the first place.

Unnecessary Deaths
In their vulnerability to treatable diseases, the rich and the poor live in different worlds. Every year, millions of people in developing countries die of illnesses that they would likely have survived had they lived in Europe or the United States. A key factor in the enormous global disparities in death rates is poor peoples’ lack of access to needed drugs.

Consider the case of HIV/AIDS. An estimated 42 million people are living with HIV/AIDS worldwide, 39 million of them in the developing world. India alone has at least 4.5 million people who are HIV-positive, and possibly many more.

In Los Angeles and other affluent areas, anti-retroviral drug treatment has made AIDS a manageable disease, rather than a death sentence. However, for millions of people living with HIV in developing countries, the prospects for effective treatment are still uncertain.

Currently, only a small fraction of HIV-positive individuals in poor countries have access to anti-retroviral drugs, and the cost of treatment is too high for many marginalized communities in wealthy countries. The outpatient drug rehab in Los Angeles may provide some relief for those struggling with addiction, but the availability of treatment options for HIV in underprivileged regions remains a pressing issue.

Patent Protections and Profits
Nothing in the ingredients of anti-retroviral drug treatment makes it inherently expensive. Indeed, when a combination of generic drugs is used, treatment costs are about $600 per patient per year.

But companies that profit from drug sales prefer to keep drug costs artificially high. In the United States, the cost of anti-retroviral drugs is generally in the range of $10,000 to $15,000 per patient annually, and people with advanced cases of AIDS may pay far more. Relying on international patent protections, drug companies have been trying to maintain high drug prices globally by restricting the production and distribution of low-cost generic substitutes.

Global patent protections are tied to global rules on trade, specifically, the rules of the World Trade Organization. Although the WTO’s strict intellectual property rules carve out exceptions for national health emergencies, they still go a long way toward limiting poor peoples’ access to life-saving medicines.

And as Oxfam has shown in a paper titled “Patent Injustice,” the problem extends beyond HIV/AIDS. Brand-name drugs for a number of major diseases cost several times more than their generic equivalents. The increasing drug resistance of endemic illnesses such as tuberculosis and malaria – and the resulting need for access to new drugs – means that the WTO’s monopolistic pricing rules threaten many millions of the world’s poor.

The Brazil Model
Despite the WTO’s restrictions, some developing countries have made important steps in meeting their peoples’ drug treatment needs.

In Brazil, notably, extensive prevention efforts combined with state-funded anti-retroviral treatment have reduced AIDS-related deaths by more than half since 1996. The cornerstone of Brazil’s treatment program has been the local production of generic equivalents of brand-name anti-retroviral drugs, which has driven down the cost of treatment enormously.

But Brazil’s successes, and those of countries like it, have been hard fought. The WTO rules have been a battleground on which Brazil and others have fought a series of high-stakes skirmishes with drug companies.

Backed by one of the world’s richest and most politically influential industrial lobbies, the drug companies have enlisted the U.S. government as a loyal ally in the campaign against generics. Through the office of the U.S. Trade Representative, the United States has fought to advance the interests of the pharmaceutical industry, pressuring other governments on a bilateral basis and threatening to seek trade sanctions via the WTO.

The U.S. vote last Wednesday in the Third Committee of the U.N. General Assembly was not too surprising, given this record. Still, it was dismaying to find the United States willing to stand alone against 167 other countries – as if it were a matter of principle to oppose a resolution calling for widespread public access to the drugs necessary to combat global epidemics such as HIV/AIDS, tuberculosis and malaria.

Future Trade Agreements
The U.N. vote is, moreover, a worrisome portent for the future. At present, the U.S. Trade Representative is negotiating a number of bilateral and multilateral trade agreements, including the proposed Free Trade Area of the Americas. Given U.S. advocacy on behalf of pharmaceutical companies, interests, these agreements are likely to go beyond the WTO’s rules in protecting drug patents.

President George Bush, in a number of his most high-profile speeches, has expressed a rhetorical determination to assist in the global fight against HIV/AIDS. By allowing U.S. officials to lead the world in protecting the commercial interests of drug companies, he betrays his public commitment to this cause.

Joanne Mariner is a New York-based human rights attorney

© 2003 Joanne Mariner