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Emperor’s New Clothes — 2007 Style

The basic premise of Dov Seidman’s new book, How, is that “how” you live your life and “how” you conduct your business is more important than ever before given the fact that in today’s plugged-in world your actions are more transparent than ever before.  As Thomas Friedman of the NY Times notes in today’s column:

When everyone has a blog, a MySpace page or Facebook entry, everyone is a publisher.  When everyone has a cell phone with a camera in it, everyone is a paparazzo.  When everyone can upload on YouTube, everyone is a filmmaker.  When everyone is a publisher, paparazzo or filmmaker, everyone else is a public figure.  We’re all public figures now.  The blogosphere has made the global discussion so much richer and each of us so much more transparent.

It’s true.  What you say and do can haunt you long after you’ve been there and done that.That truism was brilliantly reflected in the US Federal Trade Commission’s recent challenge to the proposed Whole Foods-Wild Oats merger.  Instead of relying on price studies, econometric data, or competitors showing how they would be injured by the merger, the FTC used statements by Whole Foods own management to make the government’s case.

Here’s a choice cut from a communication between Whole Foods CEO, John Mackey, to the Board of Directors that is quoted in the Complaint:

By buying [Wild Oats] we will . . . avoid nasty price wars in Portland (both in Oregon and Maine), Boulder, Nashville, and several other cities which will harm [Whole Foods'] gross margins and profitability.  By buying [Wild Oats] . . . we eliminate forever the possibility of Kroger, Super Value, or Safeway using their brand equity to launch a competing national natural/organic food chain to rival us . . . .  [Wild Oats] may not be able to defeat us but they can still hurt us . . . [Wild Oats] is the only existing company that has the brand and number of stores to be a meaningful springboard for another player to get into this space.  Eliminating them means eliminating this threat forever, or almost forever.

In response to the FTC Complaint, Mr. Mackey discusses the situation on his Whole Foods blog “ in essence trying the case in the court of public opinion rather than the court of law.  He calls the FTC investigation a “complete invasion of privacy, and generally refutes their case point by point.While free speech is fine and dandy, Mr. Mackey fails to appreciate that Whole Foods is not a sovereign kingdom.  Indeed, “how” he has conducted himself after the FTC challenge may have compounded his problems.  At a minimum, his blog commentary strains his credibility and will handcuff the arguments his lawyers can make.  As a result, the defense of this case will be more expense and the outcome more uncertain.  Probably not the result he was looking for, eh?

Yes, “how” you conduct yourself is certainly important.  But you need to “know” how to conduct yourself before you can do it right.  The way to “know” how to avoid unnecessary legal liability is to improve legal literacy and understand the ABCs of the laws that affect your business.

Without the proper grounding in legal literacy, executive swagger on blogs and internal documents are nothing more than accidents waiting to be discovered with a mouse click or a government subpoena.  That’s why form over substance in today’s plugged in world is not enough to keep your business out of trouble.  Indeed, arrogance and ignorance is a recipe for legal liability.

This entry was posted on Wednesday, June 27th, 2007 at 11:37 am and is filed under Business Blind Spots, Communications, Costs, Leadership, Smoking Guns. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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