Reclaim Democracy!

Book Chains Versus the First Amendment

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By Jeff Milchen

Editor’s Note: This 2003 article was based largely on a piece first written for the Christian Science Monitor in 1999. Check with other sources or contact us if you need the most current data.

When a group of 26 independent booksellers accepted a cash settlement of its anti-trust suit against the Borders and Barnes & Noble Corporations on April 19 [2001], it was an ambiguous ending that both sides tried to spin to their favor.

Barnes and Noble Inc. (B&N) chair Leonard Riggio declared “total vindication” for his corporation against the charges of muscling illegal discounts from book wholesalers, in defiance of anti-trust law–a statement made less convincing by his corporation’s $2.35 million settlement payment to the plaintiffs. Borders will pay an equal amount to the independents.

But the independent stores and their trade group, the American Booksellers Association, hardly could claim victory either. Weeks earlier, Judge William Orrick ruled that regardless of the verdict, the two chains would not be forced to pay damages because of the impossibility of precisely defining the independents’ losses resulting from illegal discounts the chains allegedly strong-armed from publishers.

The crimes in question were violations of the Robinson-Patman Act, enacted to prevent the use of market power to eliminate competition. Among other provisions, Robinson forbids retailers to “request” and receive terms of sale that they know to be illegal (i.e., discounts not justified by economies of scale). The chains were accused of using their dominance to wrest secret deals with publishers for cheaper books, full refunds on unsold books and other perks unavailable to the independents.

Americans have paid little attention to lax enforcement of anti-trust law, but the concentration of power in publishing is especially concerning. It threatens the existence of independent bookstores that play a crucial role in maintaining freedom of speech and the diversity of published thought. The dominance of a few giants in the book trade not only influences where we buy books, but what books we are able to buy.

The two retailing giants each control over 1000 stores. B&N Inc.’s empire encompasses B. Dalton and other subsidiaries while Borders owns Walden Books and other smaller companies. Any given store in these giants’ domain often may stock more titles than a single competing independent, seemingly increasing our choices in individual locations. However, a wealth of independent bookstores, each serving their respective owners’ and communities’ tastes, create greater overall choices and provide access to more diverse ideas and opinions.

Independent booksellers often personally promote little-known books, creating opportunities for new authors and ideas that the chains carry only after success in independent stores.

In a world of chain stores and internet sales where books are a mere commodity, an important source of opportunity for unknown writers would suffer. As the now best-selling author Barbara Kingsolver said, “Authors like me would not have a career if it were not for independent booksellers.”

The growing concentration in publishing, like B&N’s merger of its online division with global media giant Bertelsmann A.G., the world’s largest wholesaler, seriously threatens the diversity created by a variety of independents. B&N’s attempted merger with Ingram Book Group, the largest book wholesaler, was thwarted by conscious opposition, but the concentration of power continues with the recent partnering between Borders and the dominant online book vendor Amazon.com.

Competition is fading quickly; independent bookstores sold just 15% of our books last year, an all-time low. Less obvious than vanishing stores, the number of publishers and book distributors has plummeted, and we never may have the chance to know many great books and authors as a result. Consider that Dr. Seuss’ work was rejected 24 times and Alex Haley reported over 100 rejections before Rootsfound a willing publisher. Today, these authors likely would run out of options before discovering a publisher that would allow us to enjoy their gifts.

We already have the disturbing precedent of publishers consulting with Borders and B&N prior to printing a book to see if they will buy sufficient quantities to make publication a good bet. Some authors now receive suggestions for “improvements” from the chains to make their work marketable, while others simply are not published due to lack of interest by those few buyers. We should weigh the potential consequences carefully. For example, we might wonder if the chain stores were predominant in 1860 whether the hugely controversial and influential anti-slavery book, Uncle Tom’s Cabin, would have found a publisher.

Of course, some argue that the “free market” will ensure diversity. This sounds appealing until one recognizes how far removed we are from such a mythical market. Consider these examples:

  • Though the independents settled their suit against Borders and B&N, the practice already has caused irreparable harm to many booksellers. A few years ago, several publishers paid up to $25 million in settlements to the American Booksellers Association, but the bookstores driven out by the crimes are gone for good and the two dominant retailers were untouched.
  • The growth of sales by Borders.com, Amazon.com, and BN.com largely is due to federal legislation preventing states and municipalities from collecting the same sales tax from the internet giants that they collect from storefront businesses, handicapping community-serving businesses. Public schools dependent on sales tax revenue are also often the victims of this grossly anti-free market law.
  • B&N Inc. and Borders Inc. have received direct subsidies as great as $4 million from individual municipalities. Though your community may not grant such a subsidy, those collected by these corporations elsewhere pervert the market and place community-based businesses in a grossly unfair situation. Further, traded corporations are able to operate at a loss to eliminate competition so long as public money and stock speculation funds their expansion. For example, Amazon.com lost an average of $376 million each of its first eight years [it finally turned a profit in 2003], yet has made a billionaire out of its founder.

Independent booksellers are not the final victims. If the book chains continue displacing community-based booksellers, we all will lose out as prices climb higher (B&N already has eliminated the heavy discounting on which it built market share). More importantly, the diversity of published thought will erode in a market dominated by a few centralized powers.

Book buyers should weigh carefully the words of a Borders Inc. executive which came to light in recent trial. A recovered memo recorded his prediction that “in a couple of years there may only be a couple of players left who will dictate the game on their own terms.”

Of course we should keep all this in mind when choosing where to purchase books, but we should also speak up for meaningful enforcement of laws designed to protect us from the many harms of monopolies–harms that become more critical when we’re dealing with a vital source of ideas and information. This is not just for the sake of independent bookstores, but for the freedom of expression we all cherish and must never take for granted.

When Silence is Not Golden: Negative Free Speech and Human Rights for Corporations

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By Dean Ritz
Published July 1, 2003

When is silence not golden? When it supplants people’s authority by allowing corporations to remain silent on factual information, protected by the doctrine of negative free speech. Negative free speech is a Supreme Court expansion of the free speech provision of the First Amendment; it is a right to be free from forced association with a particular expression of speech. This legal existence has significant implications for social justice activists and serves to illustrate how the law is used to promote a narrow conception of democracy and human self-governance.

We find the origins of negative free speech in court battles over state laws intended to promote a diversity of views on issues of public concern. Two laws and the subsequent court battles over their constitutionality are worth noting. The first is a 1973 Florida state law that granted political candidates the right to equal newspaper space to respond to criticism of their record by a newspaper, often called “right of reply” statutes. The second is a 1980 administrative law passed by the California Public Utilities Commission that mandated access to the billing envelopes of the Pacific Gas & Electric Company for use by a ratepayer’s organization; if the utility company took a stance on an issue of ratepayer concern and distributed that stance in billing envelopes then ratepayers should have equal access to voice their divergent opinion. The Miami Herald Publishing Company successfully challenged the Florida law in the US Supreme Court, and the Pacific Gas & Electric Company successfully challenged the Commission’s administrative law. Both corporate victories helped establish the right not to speak negative free speech — as a First Amendment protection.

In numerous cases, US courts at all levels affirm informational diversity as one of the intentions of the First Amendment — the more voices, the better it is for a democracy. These good intentions have led to some decisions antithetical to democracy, such as the equation of money with speech (thus granting constitutional protection to corporate spending for political purposes) and the doctrine of negative free speech — particularly when it causes the withholding of factual information of public interest.

The federal courts permit some legislation to infringe upon constitutional liberties, inventing the doctrine of strict scrutiny as a tool to determine whether or not a particular piece of legislation will be “allowed” to do so, or whether it should be struck down. Strict scrutiny requires that the government prove a compelling public interest is being served. For example, a law that prevents people from falsely yelling “Fire!” in a crowded theater is allowed to restrict freedom of speech because that particular expression of speech poses an imminent threat to public safety (e.g., a human stampede can cause injury and death), and public safety is a compelling state interest. The second prong of the test asks whether or not the legislation implements a “narrowly tailored means” to satisfy the compelling state interest. To continue with our “Fire!” example, a law that forbids all speaking inside a theater may be applauded by those bothered by others who talk during performances, but it is far too broad to meet the compelling interest of public safety. Outlawing a falsely shouted “Fire!” is suitably narrow. Legislation is deemed unconstitutional if it fails either part of this test of strict scrutiny.

The Supreme Court applied strict scrutiny to both the Florida and California laws, decided that they failed the test, and overturned them. The Court noted the laws in question depended upon the content of speech; it was only in those cases where there was opposition to corporate speech that citizen access to the corporate-controlled communication channels was required. In Florida, this was space in the same newspaper that had printed criticism of a political candidate. In California, this was in the billing envelopes the corporation sent out to utility customers. In both cases the corporations claimed their free speech rights were violated because they were being forced to associate with speech the corporations did not endorse.

The Supreme Court hypothesized that if these laws remained on the books, the only way for the corporations to avoid the association with disagreeable speech would be for them not to publish any controversial speech at all. Thus the Court concluded that these laws impeded the informational diversity that the First Amendment seeks to foster and placed an undue burden upon corporate speakers. The Court thereby decided these laws infringed upon the fundamental liberty of free speech. Applying the test of strict scrutiny, the Court saw neither a compelling state interest being served nor a suitably narrow means of achieving whatever interests that state did possess. Thus both the Florida and California laws were revoked, and negative free speech became a new tool in the corporate fight against the potential for human self-governance.

There are two other assumptions of note in these Supreme Court decisions. First, the Court made no distinction based on who was speaking; that is, corporate speech and that of humans were considered equal before the law. Second, even a highly regulated company like a public utility warrants the same speech protections as a less or lightly regulated company. These assumptions magnify the impact of negative free speech because they remove from citizen authority the ability to distinguish between speakers, thereby creating the circumstances for conflicting claims over rights. This particular point is well illustrated by the 1996 federal Court of Appeals case of International Dairy Foods Association v. Amnestoy.

At the heart of this case were conflicting claims to the human right of free speech by humans and corporations. As readers of constitutional cases know, the framing of a case substantially determines whose rights, and thus whose interests, shall triumph: the right of human beings to be informed of factual information or the corporate claims to negative free speech? Current Supreme Court doctrine holds that both reside in the First Amendment protection of freedom of speech. International Dairy Foods concerns a Vermont labeling law that sought to provide factual information to consumers, enhancing their ability to make informed purchasing decisions.

A closely related collection of dairy industry corporations appealed the law. The Monsanto Company, the producer of the only FDA-approved rBST product, filed an amicus brief. Their lawyers claimed the statute violated the corporations’ negative free speech rights of the First Amendment. But the court recognized that the human beings who were to be the beneficiaries of this factual information were also making claims upon the First Amendment — specifically the right to be well informed.The law required that dairy products produced by cows treated with genetically engineered recombinant growth hormone (rBST) be labeled as such. The labeling technique detailed in the law was simple: either producers of affected products would add a blue rectangle to their packaging or retailers would affix a blue dot to the package. The Vermont merchant would also post a sign in their store defining what that blue symbol meant to the purchaser:

The court decided on behalf of the dairy corporations, agreeing with their lawyers’ claims that the statute required them to make involuntary statements in violation of their First Amendment rights. The court then failed to see any substantial state interest as being served by the labeling law. Unlike food additives, rBST is not directly added to food but rather added to dairy cows. “[T]he state itself has not adopted the concerns of the consumers; it has only adopted that the consumers are concerned. Unfortunately, here consumer concern is not, in itself, a substantial [state] interest.” Ideologically speaking, the court presumed that consumers had no interests other than curiosity, which is inadequate justification to pass a law restricting corporate speech. The court decided that the knowledge of how products are produced – including such unsavory production practices as child labor and environmental damage resulting from production process — is beyond the authority of its citizens’ demands and not of legitimate concern for the purpose of labeling laws.

The Court of Appeals recognized this power of law to influence ideology and thus public consciousness. If mere human concern alone were sufficient to compel corporations to label products with details on how a product was produced, then it is reasonable to infer that any and every request for informational disclosure could be justified. So the Court of Appeals used the law to temper such human expectations and ideals:

“Although the Court is sympathetic to the Vermont consumers who wish to know which products may derive from rBST-treated herds, their desire is insufficient to permit the State of Vermont to compel the dairy manufacturers to speak against their will. Were consumer interest alone sufficient, there is no end to the information that states could require manufacturers to disclose about their production methods. For instance, with respect to cattle, consumers might reasonably evince an interest in knowing which grains herds were fed, with which medicines they were treated, or the age at which they were slaughtered. Absent, however, some indication that this information bears on a reasonable concern for human health or safety or some other sufficiently substantial governmental concern, the manufacturers cannot be compelled to disclose it. Instead, those consumers interested in such information should exercise the power of their purses by buying products from manufacturers who voluntarily reveal it.”

The Court of Appeals, because of its limited definition of “safety,” did not recognize any legitimate safety issue because the FDA had already determined there were no health or human safety issues related to the use of rBST in dairy cows. In the end, basing their opinion on “sound science,” i.e., that what the FDA does not know (or tell us) cannot hurt us — the court struck down the Vermont labeling law.

International Dairy Foods decided that humans do not have the right to even know where rBST is used. And inconveniently for consumers, the Monsanto Company’s filing of lawsuits against two Vermont dairy producers, [similar to this case] and their threats of legal action against two thousand others, effectively prevent the public from knowing where rBST is not used. This arrangement grants corporations the right to silence people’s right to know, thwarts the concept of “enlighten[ing] public decision-making in a democracy,” and denies citizens the ability to “exercise the power of their purses” as the Court of Appeals cynically suggested would be a viable alternative to the labeling law.

The dissenting opinion of Justice Leval took a different tack on this case. He recognized that the labeling law dealt with factual information, not opinion. The judgment arising from facts comes from the reader, not the speaker of the facts. This factual information is exactly the kind of information that citizens have a right to request, and the government has the legal capacity to procure an answer. He wrote:

“[T]he true objective of the milk producers is concealment. They do not wish consumers to know that their milk products were produced by use of rBST because there are consumers who, for various reasons, prefer to avoid rBST. . . . In my view, the interest of the milk producers has little entitlement to protection under the First Amendment. The case law that has developed under the doctrine of commercial speech has repeatedly emphasized that the primary function of the First Amendment in its application to commercial speech is to advance truthful disclosure — the very interest that the milk producers seek to undermine.”

In other words, consumers have a legitimate right to know factual information, and manufacturers do not have a legitimate grant of authority to remain silent. Compared to the majority opinion, this dissent reflects a very different understanding of citizen sovereignty and self-governance, in particular that citizens possess an authority superior to those of their corporate creations. It also reflects an understanding that the case represents a conflict over authority, not a conflict over rights. This issue of authority deserves additional attention as it widens the scope of ethical investigation in thinking about the corporate claims to free speech rights in the specific context of this case, and claims to any human rights in general.

In theory, a government should provide for the safety of its citizens and for keeping the peace. Towards fulfilling these responsibilities, citizens tacitly accept the need for an enforcement “branch” of government, populated by the police and military. Additionally, these state responsibilities are considered valid justification for laws that infringe on constitutional rights. The recurring questions for self-governing people are whose safety, whose peace, and who is being forced by police power to be peaceful? In International Dairy Foods we can see that it is safety for corporate markets and that citizens do not have the sovereignty to demand that police power instead be used to ensure that self-governing people be well informed in order to be effective in their practice of self-governance. Here the police power was applied to keep people uninformed.

International Dairy Foods represents rivalrous claims upon the First Amendment: the corporate claim upon the right not to be associated with certain speech versus the human right to be informed. It calls attention to the immoral arrangement of granting human rights –those few recognized in the Constitution — to corporations. And this arrangement calls attention to a presumption that people and corporations have equal claims to rights, and thus are equal in the eyes of the law and of the courts. Ignoring this arrangement and its presumption perpetuates the ideology that conflicting claims upon the Constitution by human beings and corporations must be settled on the merits of individual conflicts of rights, whereas the whole conflict could be settled swiftly by conferring upon human beings sole claim to all constitutional and human rights. By this arrangement, conflicting rights claims by human beings and corporations would not be possible, and human beings would recover a sovereignty in practice now asserted only in US mythology.

As we can see, framing the International Dairy Foods case as one of conflicting claims to rights insures that many fundamental issues regarding democracy and self-governance will not be dealt with. Should commercial speech receive any constitutional protections? Is it rational to believe that corporations engage in any speech other than commercial speech (a crucial point to make regarding corporate claims to a “right to lie”)? Why do states fail to grant legal force to citizen concerns not sanctioned by regulatory agencies like the FDA and EPA? The largest question is ignored as well: should corporations possess any constitutional rights at all?

International Dairy Foods Association v. Amestoy failed to address any of these issues. The federal Court of Appeals instead framed this case as one of conflicting claims to the same right, and thus it only had to decide whose claim was superior and thus triumphant. The rule of law presumes that such conflicts can be impartially resolved but alas, that is a myth. The framing of this case imposes a distinct partiality, a bias perpetuating corporate ideology, and eliminating issues of legitimate concern for a self-governing people. Activists and lawyers should not shy away from these issues, as their public discussion will raise our standards and demands for democracy in the United States.

More on International Dairy Foods v. Amnestoy here. 

Reclaiming the Bill of Rights, Building a Movement

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Published in the winter 2002-2003 issue of
By What Authority, the journal of the
Program on Corporations, Law and Democracy.

Jeff Milchen is the founder of ReclaimDemocracy.org, a young but increasingly influential organization in the Democracy Movement. Molly Morgan interviewed him about their strategy and campaigns.

BWA: What is the focus and mission of ReclaimDemocracy.org’s work?

Jeff Milchen: Well, our tagline is “Restoring Citizen Authority Over Corporations,” and like POCLAD we focus on effecting long-term structural change that cuts across many different issues. An ongoing part of our work is delivering radically democratic perspectives through mass media to people who don’t necessarily consider themselves radical or even progressive. We dissect current issues to expose how problems are rooted in the illegitimate power wielded by corporations and moneyed interests, and we try to show clearly how changing the system could directly improve people’s lives.

Another major component of our work is building concrete tools for change and replicable models that decentralize power so that average citizens and communities have more influence in the decisions that affect them. We think the more people experience democracy close to home, the more likely they are to value it and work to expand it. People across the political spectrum who may disagree on outcomes still have common goals in creating a more democratic society, but their differences may hide those shared interests. One reason is that so much of the “news” is alienating and disempowering — it obscures the work and impact of ordinary citizens while exaggerating the power of those in official positions.

BWA: How do you get your message out?

JM: Our media outreach has focused primarily on print media plus some talk radio programs. We’ve had significant success — from op-eds in mainstream newspapers like the Washington Post, Newsday, and the San Francisco Chronicle to strategy and solution-oriented pieces in publications like The Ecologist, Black World Today, and major Spanish-language newspapers like La Opinion and La Prensa. As an example of how revoking illegitimate corporate power concerns people across the political spectrum, our work has been written up in business magazines and conservative tabloids like American Free Press as well as progressive magazines like Utne Reader.

BWA: Describe your campaign to revoke corporate free speech.

JM: We’re helping to instigate what we hope will be the broad national coalition necessary to put this issue on the radar screen. We believe that corporate free speech is a desecration of our Constitution and that this is an especially good time to generate public debate about it because a case called Nike v. Kasky stands an excellent chance of being reviewed by the Supreme Court in 2003. The case centers around the issue of commercial speech — a category of communication created by the Court.

The Supreme Court is a political institution that responds to major shifts in public opinion. Our goal is to use Kasky to make the issue of corporate free speech a high-profile controversy, framed as a matter of justice, like other struggles for civil rights. We need huge numbers of citizens generating pressure on our courts and influencing their thinking, and it’s a challenge because the injustice is less direct and obvious than for other abuses of our rights.

Our initial focus in this effort is on the American Civil Liberties Union (ACLU). We want to persuade their leaders that their mission to defend civil liberties for human beings is undermined by their consistent support of corporate “rights.” This is especially disturbing when our civil liberties are under siege by the Bush Administration and Congress. The ACLU also expends resources to oppose most significant campaign reform efforts by supporting the doctrine that spending money to influence elections is protected “free speech.”

Our position is that all communication by for-profit corporations is inherently commercial speech and that no constitutional protection exists — it’s up to We the People, working through our democratic institutions, to decide what privileges commercial entities should enjoy. The Bill of Rights was intended to protect only human beings, but previous Courts have claimed that speech itself is protected by the First Amendment — that a thing is protected rather than the right of a person — which goes against any reasonable interpretation of the Bill of Rights.

BWA: Wouldn’t revoking corporate free speech diminish the First Amendment and limit opportunities for organizations like the ACLU and ReclaimDemocracy.org to speak?

JM: No. The Supreme Court has distinguished explicitly between advocacy groups and profit-centered corporations in two cases: Austin v. Michigan Chamber of Commerce (1990) and FEC v. Massachusetts Citizens For Life (1986). In FEC, the majority said: “Massachusetts Citizens For Life was formed to disseminate political ideas, not to amass capital. The resources it has available are not a function of its success in the economic marketplace, but its popularity in the political marketplace.”

It’s worth noting that in colonial times, the word “speech” often described discourse — an interactive communication, as in, “I’d like to have a speech with you.” The Constitution writers likely wanted to protect dialogue, not just broadcasting one’s views. How can people dialogue with something like the Nike Corporation, which has no mouth or ears, let alone a mind?

Restoring a reasonable definition of free speech would actually amplify the voice of small organizations like ours with a genuine human constituency. Individual citizens and grassroots organizations can never speak as loudly with our own voices as corporations can with the unlimited amplification of money. But if our relative impact corresponded to the quality of our ideas and how effectively we worked to promote them, rather than how much money we spend, we’d have a very different country.

Of course, corporate speech has been key to amassing wealth and power for corporations, and their hirelings will fight to retain it. Public relations departments will churn out messages framing corporations as the defenders of liberty. Corporate lawyers will argue about slippery slopes and the freedom of speech being sacrosanct. They’ll say even speech we don’t like needs to be protected and use examples of unpopular speakers like the Ku Klux Klan. Our work is to properly frame the debate: the Constitution protects the rights of human beings, not things, and only people have rights to free speech. The popularity of a speaker is not an issue, but the speaker’s humanity is!

BWA: How does corporate free speech affect public policy?

JM: Virtually every issue of consequence is affected by the illegitimate influence of corporations derailing democracy, but here’s one: both of the dominant political parties constantly espouse the value of “free trade,” yet they pass laws that preclude or destroy competition in countless industries. Take pharmaceuticals. The government creates and enforces monopolies [patents] on drugs, not for the benefit of taxpayers who fund the development of two-thirds of the most medically significant drugs, but for corporations. As a result, Bristol-Meyers-Squibb Corporation can gouge cancer victims for 20 times the production cost of its patented drug, Taxol. Did cancer patients and citizens have an opportunity to participate in the decision to give away the patent? Hell, no. We were never even informed that we paid for its development!

Squibb exercises its “speech” by spending millions for paid lobbyists in Washington, who shape issues and frame debate in ways that bypass the most critical questions entirely. This is why we never hear ideas like “let’s keep public control of these drugs and contract a corporation to produce it at a modest profit.” As long as we allow corporate wealth to translate readily into political power, these abuses of the public interest will be the norm.

BWA: What kinds of positive alternatives to corporate power do you work to create?

JM: Ultimately, corporate power comes from a single source — our money — so we work to divert money and power away from absentee-owned corporations and toward community businesses that are locally rooted. It’s tough to hide from the consequences of your business decisions when they have a visible impact on your neighbors and the town you live in. We show people that there are many alternatives to giant corporations — that, in most cases, local businesses can provide the bulk of communities’ needs and do it as well or better.

A few years ago we started the Boulder [Colorado] Independent Business Alliance (BIBA) with the goal of helping the community to stop chainstores from continuing to displace local businesses. We organized collaborative campaigns funded by independent local businesses, including public education, direct pooling of resources for group purchasing and marketing, and political organizing to promote local policies favoring community-rooted businesses. BIBA opened a lot of doors for democratic conversations that included many people and organizations who would have been difficult to engage through, say, POCLAD or ReclaimDemocracy.org.

We consciously worked to develop a model that others could employ, and last year we launched the American Independent Business Alliance (AMIBA) to help other communities use it. There are four more IBAs now with substantial paying memberships — Salt Lake City, Utah; Corvallis, Oregon; Austin, Texas and Santa Fe, New Mexico– and several other communities are in earlier stages of organizing. We’re helping to seed and connect these groups to build a national network that eventually will change trends on a larger scale.

I believe that owners of farms and other small businesses are essential to the success of the Democracy Movement. These folks know as well as anyone how destructive giant corporations can be, but not only have most activists failed to forge alliances with small-business owners, we tend to alienate them with broad-brush attacks on business. Sloppy use of language like “business interests” does great harm to our cause.

A long-term goal of ours is to develop a powerful counterforce to entities like the US Chamber of Commerce, which gains its legitimacy from thousands of small member businesses, but actually exploits them to promote the agenda of the transnationals that drive its agenda. We should seize the label of “pro-business” for ourselves, making it clear what kind of business we’re for and why. After all, small-business owners already know that “corporate speech” only helps those big enough to hire lobbyists and public relations firms.

Learn more about POCLAD at POCLAD.org

Book Review: Unequal Protection

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by Thom Hartmann

Unequal Protection offers some valuable new insights into the role of corporations in early U.S. history and the process through which corporate lawyers successfully promoted the “corporate personhood” doctrine.

We often have written the application of Bill of Rights protections to corporations arose from the 1886 Supreme Court ruling in Santa Clara County v. Southern Pacific Railroad, but Hartmann’s new research has added rich detail to the story.

You may have read accounts of Santa Clara citing the Court record that “The Court does not wish to hear argument” on the question of whether the 14th Amendment applies to corporations, and “we are of the opinion that it does.” But the Court made no such decision because the Constitutional question never arose in deciding the case (though arguments on the topic were heard). Justice Field, an adamant supporter of corporate personhood, proved as much in his concurring opinion when he lamented that the Court did not rule on the matter.

In fact, the Court record that subsequently was cited to claim Bill of Rights protections for corporations reflects nothing more than the spoken opinion of one Chief Justice Waite and a clerk. Notably, Justice Waite was appointed directly to the Supreme Court with no experience as a judge–he came straight from a position as a railroad lawyer.

The truth behind Santa Clara is just one of many engaging stories presented in Unequal Protection . Beyond illustrative history, Hartmann explores the real-life impacts of corporate personhood, including how corporations: hide accounting crimes and evidence of cancer-causing products by claiming the “right” against self-incrimination; block inspectors investigating toxic emissions and workplace dangers by claiming the “right” of privacy; defy local, state and national attempts to regulate the worst of their abuses by claiming the “right” to be free of discrimination.

Hartmann also provides a compelling argument that the current corporate hegemony was not what the American revolutionaries, be they Federalists or Democratic Republicans, envisioned for the United States . Even better, Hartmann offers specific actions to remedy the usurpation of our sovereign right to govern ourselves and the institutions we create. He helps deliver our message of why citizens must move beyond single-issue struggles and towards the assertion of democratic control of our economy and institutions.

Unequal Protection is recommended to all readers who wish to expand their knowledge of history relevant to our struggles against illegitimate corporate power or who wish to gain new insights on solving current problems in that realm.

Editor’s note: You may also be interested in checking out Thom Hartmann’s 2004 illustrated story book, We the People: A Call to Take Back America, which covers corporate personhood and other topics in an entertaining and easily accesible format.

Once Foes of Big Tobacco, States Have Been Hooked

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By Gordon Fairclough and Vanessa O’Connell
First published in The Wall Street Journal, April 2, 2003

Editor’s note: Two years ago, we wrote about the perverse incentives that would be created by linking states’ income to the success of the cigarette industry. Now several states are helping the most powerful cigarette corporation stay in business to addict more new customers to the world’s most widely fatal drug.

State governments, once among the tobacco industry’s fiercest foes, now find themselves in an unusual position: They are poised to try to rescue the country’s biggest cigarette maker in one of its darkest hours.

In 1996, Washington state Attorney General Christine Gregoire sued the country’s biggest cigarette companies, eventually extracting hundreds of millions of dollars in settlement money for her state’s citizens. “The tobacco industry has targeted our kids, withheld safer products and deliberately misled the public about the safety of smoking,” Ms. Gregoire said at the time.

Her efforts, along with those of other state attorneys general, constituted the first large-scale, successful legal assault on the tobacco industry. Opening the door for a slew of additional litigation, the state suits changed the terms of the debate on the cigarette business, shattering the aura of invincibility that had surrounded tobacco companies. One should visit benzo detox at Muse to know the extent of how these drugs can flip one’s lifestyle upside down completely thus finding no way to return back to normal.

Now, however, Ms. Gregoire and other state attorneys general may go to court to protect Philip Morris USA, the maker of Marlboro. At issue: an Illinois state judge’s order that Philip Morris, owned by Altria Group Inc., post a $12 billion bond in order to appeal a massive defeat in a class-action lawsuit. Philip Morris USA suggested the bond requirement could force it into bankruptcy court. Until a recent image makeover, Altria was known as Philip Morris Cos.

The enormous bond “could create a chilling effect on the ability of the defendant to appeal,” Ms. Gregoire said last week in a press conference. And, more importantly, it “could deal a significant, unnecessary financial blow to the states.”

Altria’s current plight, rife with irony and contradiction, demonstrates how private and public interests can become entangled in surprising ways. The very states that won huge tobacco settlements in 1997 and 1998 became hooked on the money, which for many states is staving off budgetary catastrophe. The Illinois court order threatens the tobacco cash flow and has sent the states scurrying to switch sides.

All of this has angered public-health activists and some of the attorneys general who were part of the settlements. “Certainly many of us never anticipated that states would become addicted to the tobacco money as a way to finance their operations,” said Scott Harshbarger, who was attorney general of Massachusetts at the time of the settlements. “It’s a perversion of the intention of the litigation, and it’s very unfortunate, both as a matter of public policy and a matter of health policy.”

The settlements didn’t restrict how states could spend the tobacco money. But the purpose of the state lawsuits was to generate funds to cover public-health costs and smoking-prevention programs, not general budget needs, Mr. Harshbarger said.

What changed? Under the tobacco settlements of the late 1990s, major cigarette manufacturers agreed to pay the states a total of $246 billion over 25 years to settle lawsuits. The companies also agreed to a series of restrictions on the way they sell cigarettes. The settlements have given state governments a huge additional interest in the continued financial health of the tobacco industry, especially in these days of declining tax revenues and widening state budget deficits. Many states also have relied increasingly on cigarette-excise taxes.

Philip Morris, for its part, is aggressively playing on the states’ dependence. The company is due to pay $2.5 billion to the states by April 15 but is warning it may not be able to do so because of the Illinois bond order. Philip Morris is responsible for roughly half of the yearly settlement payment to the states. Its annual payment is usually made early, on March 31, but on Monday, the states didn’t get their fix.

‘Real Money’

William H. Sorrell, the Vermont attorney general, said he has already warned the state’s governor and legislators that “they might not be getting money they have already spent” — $13 million, in Vermont’s case. Said Mr. Sorrell: “Thirteen million dollars is real money in Vermont.”

Several states that had planned to issue bonds backed by expected tobacco-settlement payments were scrambling to come up with new ways of raising money to close budget deficits. Virginia’s treasurer, Jody M. Wagner, Tuesday put on hold $767 million in such bonds, sales of which were scheduled to close on Thursday. “We spoke with the underwriters this morning, and they told us they couldn’t proceed with closing this deal,” Ms. Wagner said. The state had planned to use the bond money to revitalize the economy of its slumping tobacco-growing regions.

Also now in doubt: California’s plan to sell $2 billion of bonds backed by tobacco payments in mid-April to help finance its huge deficit. Similarly at risk is a plan in New York to float a hybrid $4.2 billion bond offering backed by personal-income tax revenues and tobacco money. Kansas had planned to float $175 million in capital-improvement bonds, funded partly by tobacco-settlement payments, which would have covered that state’s $105 million budget gap for the current fiscal year.

With the possibility of the Philip Morris money not arriving, several state attorneys general were preparing to enter the fray. Vermont’s Mr. Sorrell said the states would most likely file a formal motion to intervene in the Illinois case. That would allow the states to urge the court to impose a lower bond to protect their voters’ financial interests. (The states wouldn’t challenge the underlying verdict against Philip Morris.) Illinois law ordinarily requires a bond equal to the entire trial judgment — a mechanism to ensure that if the plaintiff wins on appeal, the full amount will be available.

The bond requirement stems from a $10.1 billion verdict late last month against Philip Morris in a suit over its low-tar cigarettes. In the first class-action alleging that such labels mislead smokers into thinking that those cigarettes are less harmful, Judge Nicholas Byron of the state court in Madison County, Ill., ordered the company to pay $7.1 billion in compensatory damages and an additional $3 billion in punitive damages. The judge tacked on $1.8 billion in fees for the plaintiffs’ lawyers.

To be sure, the same state officials who want Altria and its rival tobacco companies to survive continue to attack cigarette makers. Various states recently have taken legal action to enforce marketing restrictions that the settlements imposed on cigarette makers. New York, which is hoping to sell bonds based on tobacco-settlement payments to deal with its current budget woes, last week enacted one of the nation’s toughest laws restricting smoking in public places. R.J. Reynolds Tobacco Holdings Inc. and Loews Corp.’s Lorillard Tobacco unit Tuesday filed a lawsuit against California alleging that the state is improperly “vilifying” cigarette makers in the state’s antismoking ad campaign.

But there has been a broad alignment of economic interests between cigarette makers and the states. Considering both cigarette taxes and the settlements, “the states make more money from each pack of cigarettes sold than anyone else, and they have an enormous financial stake” in tobacco sales, said Tommy J. Payne, executive vice president of Reynolds, the nation’s No. 2 cigarette maker.

In the years since the settlements, legislators in 16 states, egged on by the attorneys general, have passed laws limiting the size of bonds that must be posted by corporate defendants seeking to appeal trial defeats. In four of the states — Louisiana, Nevada, Oklahoma and West Virginia — the laws only apply to cigarette companies that settled.

States have helped the big cigarette manufacturers in other ways as well. Twenty-two have passed laws that would essentially force small makers of bargain-basement cigarettes out of the market if they don’t make certain payments required by the major tobacco settlements or related legislation. These laws hinder deep discounters that have been eating into the larger cigarette makers’ profits. Propping up the bigger players makes economic sense to the states because their settlement payments rise and fall in line with cigarette sales by the big manufacturers.

Between November 1998, when the tobacco industry signed its main settlement with 46 states, and 2002, cigarette makers paid those states more than $21.6 billion. An additional $5 billion is scheduled to be paid this year.

States have increasingly come to rely on this money — as well as on rising cigarette-excise taxes — as they struggle to cope with their worst financial crisis in 20 years. “These dollars are becoming more and more important,” said Lee Dixon, who tracks health policy for the National Conference of State Legislatures.

In the 1990s, states became accustomed to plentiful tax revenue, in part because the rising stock market inflated taxes on capital gains and income. Governors and legislatures pushed through popular spending programs and cut unpopular levies.

Short-Term Solutions

Then, when the economy began to sour, many states chose short-term solutions, such as tapping the settlement payments and draining cash reserves, rather than realigning their budgets to reflect new economic realities. For the current fiscal year, which ends for most states on June 30, 21 of the 46 states that signed the main 1998 tobacco settlement agreement tapped that money to help close shortfalls. The previous year, 16 states relied on settlement money.

As of February, the collective deficit for the 50 states for fiscal year 2003 was $27 billion, according to data supplied by the National Conference of State Legislatures, which is based in Denver. Next year, the states are looking at even bigger deficits. Most states, unlike the federal government, are required by law to balance their books at the end of their one- or two-year budget cycles. This forces them to cut spending, raise taxes, or both.

That’s why state officials across the country are watching the situation in Illinois so closely. Philip Morris’s general counsel, Denise Keane, last week sent a letter to Ms. Gregoire, the Washington state attorney general, saying that the company was “not financially able to post the enormous bond that the Madison County court has demanded” and warning that “it is presently uncertain” whether Philip Morris would be able to make its $2.5 billion payment to the states.

Illinois Attorney General Lisa Madigan said she will take Philip Morris to court if it doesn’t make the payment.

Altria has long prided itself on its high credit rating, so it was particularly striking Monday when Moody’s Investors Service cut Altria’s rating by two notches, to just three levels above “junk.”

Illinois lawmakers are now considering legislation that would limit the amount of money Philip Morris must put up as a bond in order to appeal. Representatives of Philip Morris and the states’ outside trial lawyers met Tuesday in Chicago under the auspices of the speaker of the Illinois House of Representatives to try to cut a deal.

Philip Morris wants the cap set at $100 million. The trial lawyers were looking for a cap of between $500 million and $1 billion. State Rep. Robert S. Molaro, a Chicago Democrat, said Tuesday that once the parties agreed on a figure, lawmakers would move forward with a bill.

Public-health groups say they oppose any legislation that would protect Philip Morris. “We don’t think the Illinois legislature ought to pass a bill to help one company, especially a company that’s been found to have injured more than one million citizens of the state,” said Matthew L. Myers, president of the Campaign for Tobacco-Free Kids.

Mr. Myers said that Altria, which isn’t a defendant in the Illinois case and thus isn’t technically liable, could pay the bond for Philip Morris. Altria has an $8 billion credit line and pays about $5 billion in dividends each year. “Philip Morris wants the court to relieve it of any obligation to make any sacrifice,” Mr. Myers said.

Altria responded to this assertion by pointing to a filing it made last week with the Securities and Exchange Commission in which it said Philip Morris can’t post a $12 billion bond.

The Illinois share of the Philip Morris payment due April 15 is $150 million, according to former Illinois Gov. Jim Thompson, who is now lobbying for the company. Most of that money is earmarked for health-care programs for the elderly, Mr. Thompson said.

“We’re very concerned that the amount of the appeal bond will adversely affect budgets in 46 states,” said W.A. Drew Edmondson, attorney general of Oklahoma. There is “no benefit to public health by putting Philip Morris in the financial position” of having to declare bankruptcy, he added. “They’re going to sell just as many cigarettes even if they’re in receivership.”

Gregory Zuckerman, Christopher Lawton, Richard A. Bravo and Stan Rosenberg contributed to this article.

In U.S. First, Local Government Refuses to Recognize Corporate Claims to Civil Rights

by

News from the Community Environmental Legal Defense Fund
December 13, 2002

The elected municipal officials of Porter Township, Clarion County – a municipality of 1,500 residents an hour north of Pittsburgh in Northwestern Pennsylvania – became the first local government in the United States to eliminate corporate claims to civil and constitutional privileges. The Township adopted a binding law declaring that corporations operating in the Township may not wield legal privileges – historically used by corporations to override democratic decisionmaking – to stop the Township from passing laws which protect residents from toxic sewage sludge.

The actions by Porter Township, taken December 9, 2002, repudiate the history of state and federal public officials restricting the rights of citizens while expanding the rights of corporations and their owners.

Background
Along with close to a dozen other municipal governments in Pennsylvania, Porter Township officials had previously adopted a local law governing the land application of sewage sludge in the Township. The adoption of that municipal law was an outgrowth of the work done by residents and municipal officials to stop sewage sludge corporations from dumping Pittsburgh-generated sludge in the Township. To that immediate end, the municipal government adopted a “tipping fee” law that requires corporate sludge haulers to pay a per ton fee to the Township to enable the municipality to verify the safety of each load of sludge applied to land.(see endnote)

Sludge corporations have responded both legislatively and judicially to the adoption of those laws by Pennsylvania municipalities – which prevent corporations from turning to state and federal officials to override local self-governance.

Judicial Response
In 2000, Synagro Corporation — one of the largest sludge hauling corporations in the United States — sued Township officials in Centre County, Pennsylvania in an attempt to overturn the “tipping fee” law adopted by that Township. In their Complaint, the Corporation alleged that the law violated a litany of civil and constitutional rights asserted by the corporation. A ruling by the federal court is expected by 2004.

Legislative Response
 Legislatively, sludge corporations drafted and vigorously pushed bills that would strip Pennsylvania municipalities of their authority to make rules that would control the land application of sewage sludge and factory farms. A unique coalition of groups that included municipal governments, the Pennsylvania Farmers Union, the Pennsylvania Association for Sustainable Agriculture, the Sierra Club, the AFL-CIO, the United Mine Workers of America, Common Cause and others, defeated that legislation at the end of the 2002 legislative session.

In addition to the legislative and judicial responses to the assertion of local democracy by communities, sludge corporations have also instructed the state environmental regulatory agency and corporate farm lobbies to intervene with Clarion County Townships. In late 2002, the Pennsylvania Department of Environmental Protection and the Pennsylvania Farm Bureau met with Clarion County Townships to convince them to repeal their local laws. The four Clarion County Townships that have adopted the law refused. Instead, Porter Township forged ahead with adopting the most recent law, which eliminates corporate interference in the democratic processes of the Township.

Also in late 2002, the Alcosan Corporation, a sludge hauling corporation in Pennsylvania, threatened to use Pennsylvania courts to overturn the sludge law passed by the Township. Porter Township Supervisors, upon learning of the ability of corporations to direct the courts to vindicate corporate claims to civil and legal privileges to override local governments, decided to pass a law to eliminate corporate claims to those rights.

The actions of Porter Township — along with the actions of other municipal governments in Pennsylvania dealing with land applied sewage sludge and factory farms — evidence a shift of communities away from permitting corporate harms to asserting direct control over corporations.

The Sludge and Corporate Personhood Ordinances were developed by the Community Environmental Legal Defense Fund in partnership with the Program on Corporations, Law, and Democracy (POCLAD) and communities across Pennsylvania impacted by land applied sewage sludge and corporate factory farms.

Notes
Currently, the state Department of Environmental Protection only requires sewage treatment plants to test their sludge quarterly for health and safety purposes, and over a dozen Township governments in three Pennsylvania Counties have decided that such testing is inadequate to ensure the health, safety, and welfare of Township residents. The “tipping fee,” charged to the sludge corporation, provides monies to the municipality for the hiring of a testing laboratory, and for sampling each load of sludge for testing purposes. Corporate haulers are prohibited from applying sludge before the test results are returned to the Township government.

For more articles and campaigns on revoking illegitimate corporate power, see our “Corporate Personhood” page.