Market Overview

Pink Slime: What we have here is a failure to communicate

BPI, the corporation that sold the product its critics dubbed “pink slime” that was secretly added to our hamburgers has now brought a $1.2+ billion tort suit against ABC News, individual ABC journalists, two former USDA scientists, and a former BPI employee. BPI claims that the defendants defamed it by, for example, calling its meat product, which it calls “lean finely textured beef” (LFTB), “pink slime.” It's not clear from BPI's complaint why the ABC defendants wanted to harm BPI. The only claim that even begins to suggest a motive for malice is that the ABC defendants wanted higher ratings – which is presumably true of all media at all times. The complaint suggests no reason why the USDA scientists would bear any malice against BPI. Indeed, because BPI denies that the USDA scientists are whistleblowers it refutes the usual theory that the government official blames the firm for the retaliation he suffered when he blew the whistle on the firm. The failure to present a basis for any malice on the part of the scientists is a serious weakness in BPI's case because the ABC defendants relied on the USDA scientists' expertise and if the plaintiffs cannot identify any basis for the scientists bearing malice against BPI then the ABC defendants had no reason to suspect them of malice. One of the USDA scientists appears to have dubbed BPI's product “pink slime.”

BPI suffered a catastrophic loss of sales once the public learned from the media a series of facts about its product that BPI and the U.S. government had deliberately kept from the public. For the sake of neutrality let us call BPI's product “X.” Unbeknownst to the consumer, X was made from meat scraps processed with a spritz of ammonia gas – and then secretly added to our hamburgers. The media reports were extremely critical of X. BPI mounted a massive PR response to the criticisms. The net result was that the public generally refused to eat hamburgers to which X was added.

The central irony is that BPI is reeling because its business plan for X violated, and continues to violate, its own corporate slogan: “communicate and cooperate.”

http://www.youtube.com/watch?v=PUKHPz0QWBg

Prior to the media disclosures about X, BPI sought to prevent consumers from learning key facts about X – including its undisclosed addition to our hamburgers. After the media disclosures about X, BPI did not cooperate. It “went to the mattresses.” It pulled in its political allies and its lawyers and it brought a lawsuit that, were it to succeed, would cause a terrible loss of first amendment rights. It used its lawyers and economic power to try to destroy two scientists who cannot possibly afford to defend themselves against the BPI legal juggernaut. BPI makes no credible claim that the scientists bore any actual malice against it. Instead, it appears that the scientists were sincerely concerned for the consumers of X and believed that the failure to inform the consumers about X was unconscionable.

The Roth family, which owns BPI, is immensely wealthy and politically connected. The Roth family has suffered a serious loss of wealth and reputation due to the media disclosures to the public about X. On a human level it is understandable that they would seek to use their wealth and power to crush their media and scientific critics. But the use of great power requires great restraint if our first amendment rights are to remain real. If the Roths' lawsuit prevails they will deal a body blow to the nation they say they love. It is precisely when the industry and the government agency agree to withhold information from the public that we most need to protect from this type of chilling lawsuit those few individuals willing to warn the public that they believe the regulators have been captured by the industry.

The Roths went desperately wrong when they shaped their business strategy for selling X on the goal of keeping facts from the consumers that Mr. Roth thought were unimportant, but which most consumers showed that they considered decisive once they began to learn about X. BPI has a second slogan: “we know how to do things because we do things.” Because BPI's strategy was that it and its purchasers not do certain things (disclose certain facts about X to the consumer, including its addition to our hamburgers) they did not know how to do the disclosures that consumers wanted once they began to learn that X was being added to their hamburgers without disclosure.

Bill Black is the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. He spent years working on regulatory policy and fraud prevention as Executive Director of the Institute for Fraud Prevention, Litigation Director of the Federal Home Loan Bank Board and Deputy Director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.

Bill writes a column for Benzinga every Monday. His other academic articles, congressional testimony, and musings about the financial crisis can be found at his Social Science Research Network author page and at the blog New Economic Perspectives.

Follow him on Twitter: @WilliamKBlack

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Bill Black is an Associate Professor of Economics and Law at the University of Missouri – Kansas City (UMKC). He is a white-collar criminologist. He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He taught previous
 

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