Public Protests, Private Lawsuits, and the Market: The Investor Response to the McLibel Case
| DOI | http://doi.org/10.1111/1467-6478.00187 |
| Published date | 01 June 2001 |
| Author | Douglas W. Vick,Kevin. Campbell |
| Date | 01 June 2001 |
JOURNAL OF LAW AND SOCIETY
VOLUME 28, NUMBER 2, JUNE 2001
ISSN: 0263-323X, pp. 204–41
Public Protests, Private Lawsuits, and the Market:
The Investor Response to the McLibel Case
Douglas W. Vick* and Kevin Campbell*
The tendency of English libel law to protect reputation at the expense of
freedom of expression makes the United Kingdom a potentially attractive
forum for retaliatory lawsuits against individuals and organizations who
lobby or campaign against the interests of large companies. The most
prominent recent example of such a lawsuit was the so-called ‘McLibe l’
case, in which McDonald’s Corporation sued protesters who had distri-
buted anti-McDonald’s leaflets outside some of the company’s restaurants.
The case is often cited as evidence that the risk of unfavourable publicity
generated by retaliatory libel actions is a strong deterrent to using the libel
laws to silence public opposition to corporate activities. This article uses a
technique widely employed in financial economics research, the ‘ev ent
study’ method, to investigate whether the unanticipated bad publicity
attracted by the McLibel case had a negative financial impact on
McDonald’s, such that future retaliatory lawsuits might be deterred.
In the mid-1980s, scholars in the United States of America identified a
phenomenon then believed unique to that litigious society: with increasing
frequency individuals and corporations were filing retaliatory lawsuits,
usually claiming libel, against individuals and organizations whose lobbying
campaigns, protests or demonstrations were perceived to threaten the filers’
economic interests. In most of these actions – which were called ‘strategic
lawsuits against public participation,’ or SLAPPs
1
– the claimants’ chances
204
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1
This term was first used in two 1988 journal articles. See P. Canan and G.W. Pring,
‘Strategic Lawsuits Against Public Participation’ (1988a) 35 Social Problems 506; P.
Canan and G.W. Pring, ‘Studying Strategic Lawsuits Against Public Participation:
*Department of Accounting, Finance and Law, University of Stirling,
Stirling FK9 4LA, Scotland
We would like to thank Robin Limmack, Gavin Little, Laurence Lustgarten, Jim Steeley,
and three anonymous reviewers for commenting upon previous drafts of this article. Isaac
Tabner provided invaluable research assistance for this project. Thanks also to those
participants in the Socio-Legal Studies Association’s Annual Conference in Belfast,
many of whom may recognize their observations among our conclusions.
of prevailing on the merits were slim, for it is very difficult to win libel cases
arising out of communications about matters of public concern under United
States law. But sustaining the claims on their merits was not the point; few
defendants had the resources to contest the actions, and would usually agree
to cease their activities opposing the claimants’ interests in order to have the
claims discontinued.
Some now fear that SLAPPs have become yet another unfortunate
American cultural export to the United Kingdom. Indeed, English libel law is
potentially more inviting to large companies wishing to silence public
opposition to their activities because libel cases are much easier to win in
England than they are in the United States. Many observers, however,
consider that the danger of libel laws being used to deter criticism of the
activities of large companies is overstated, because the risk of unfavourable
publicity that could be triggered by SLAPPs would far outweigh the benefits
such lawsuits could bring. Arguably, the paradigmatic case of a ‘SLAPP
gone wrong’ is the so-called ‘McLibel’ case, in which the US-based
McDonald’s Corporation and their wholly-owned British subsidiary,
McDonald’s Restaurants Ltd. (together referred to as ‘McDonald’s’) filed
a libel writ in London against protesters who had been distributing anti-
McDonald’s leaflets outside some of the company’s restaurants. Instead of
agreeing to cease their activities and apologise, however, two of the
protesters dedicated the next few years of their lives to fighting the lawsuit,
representing themselves in a protracted legal battle that attracted a
substantial amount of bad publicity for the company. Although McDonald’s
ultimately obtained a partial victory on the merits of their claim, this victory
was seen as largely pyrrhic.
2
But was it? It would be fair to assume that many of those who learned of
the action brought by McDonald’s and the unusual sacrifices made by the
defendants in fighting it would be deterred from engaging in like conduct
against the company. The question is whether this benefit to the company
was outweighed by other harms. Those who may be most sensitive to the
balance of costs and benefits associated with the company’s actions are
securities investors, who must continuously reassess the value of publicly-
traded companies in making decisions and recommendations about whether
to buy, sell, or hold their stock. The collective evaluation of investors is
reflected in the company’s share prices on stock exchanges.
3
One way of
205
Mixing Quantitative and Qualitative Approaches’ (1988b) 22 Law and Society Rev.
386. By the end of the 1990s the term was in common use among American lawyers,
judges and legislators. See, for example, Briggs v. Eden Council for Hope &
Opportunity (1999) 969 P2d 564, 565 n 1 (discussing use of term in California cases).
2 See, for example, D. Hooper, Reputations Under Fire: Winners and Losers in the
Libel Business (2000) at 171–3.
3 To economists, the ‘market’ is essentially a descriptive notion: it describes the
aggregation of the behaviours of investors who are, it is assumed, free to choose how
to act. It does not explain the reasons choices were made.
ßBlackwell Publishers Ltd 2001
determining whether investors perceived and acted upon any harm to
McDonald’s resulting from the adverse publicity generated by the McLibel
suit is to assess the stock market response to that lawsuit through a set of
statistical techniques known collectively as the ‘event study’ method.
This article uses the event study method in investigating whether the
unanticipated bad publicity the McLibel case attracted had a negative
financial impact on McDonald’s, such that future ‘SLAPPs’ might be
deterred. In the first part of the article, the ‘SLAPP’ phenomenon in the
United States is examined, and some of the implications of the export of this
phenomenon to the United Kingdom are explored. The article then looks at
the McLibel case itself, and how McDonald’s apparent strategy to quell the
small-scale campaign being waged against it had the unintended
consequence of focusing greater public attention on the protesters’
allegations, and in the process made the company seem like ‘bullies’ to
many observers. The effect of this publicity on McDonald’s is assessed
empirically by examining whether specific key events in the long history of
the McLibel litigation affected the price of the company’s stock. In addition,
the performance of the company’s stock over the entire span of the McLibel
litigation will be compared to the performance of the Standard and Poor’s
(S&P) 500 Composite Index (which tracks the performance of a large sample
of established publicly-traded United States companies) in order to get a
broader perspective on the case’s economic impact.
I. ‘STRATEGIC LAWSUITS AGAINST PUBLIC PARTICIPATION’
(SLAPPs)
SLAPPs have been defined by George Pring and Penelope Canan, the
scholars who coined the term, as private lawsuits filed against individuals or
groups in response to political activities such as ‘circulating a petition,
writing a letter to the editor, testifying at a public hearing, reporting
violations of law, lobbying for legislation, peacefully demonstrating, or
otherwise attempting to influence government action.’
4
In the United States
of America, where the SLAPP phenomenon apparently originated, most of
these lawsuits alleged defamation.
5
Typically, they were filed by
206
4 G.W. Pring and P. Canan, SLAPPs: Getting Sued for Speaking Out (1996) at 1.
5
53 per cent of the cases studied by Pring and Canan were libel cases. id., at 217. In
the remainder, conspiracy, tortious interference with contract, tortious interference
with prospective economic advantage, abuse of process, nuisance, antitrust
violations, and civil rights violations were alleged. The typical SLAPP case in the
Pring and Canan database was filed by an individual ‘acting on economic or
occupational interests’: most actions were brought by land developers, property
owners, public utilities, alleged polluters, police officers, or local government
officials. See Canan and Pring, op. cit. (1988b), n. 1, at p. 389. The public interest
issues implicated by the political activities of the targets of these suits usually
involved zoning, land use, environmental protection, or civil rights (id. at 388–9).
ßBlackwell Publishers Ltd 2001
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