Monday, December 15, 2003

Corporate Cowards: Dow AgroSciences

It is often considered axiomatic among advocates of the free market that all businessmen are heroes. On the contrary, all but a few businessmen fail to defend even their most basic rights, and their cowardice results in the destruction of untold amounts of wealth. As part of a new project, CAC is going to highlight these corporate cowards and expose them for their wealth–destroying ways. Appropriately, today's "Corporate Coward" award goes to Dow Chemical subsidiary Dow AgroSciences and its CEO A. Charles Fischer.

A subsidiary of Dow Chemical Co. will pay a $2 million court-ordered penalty to the state of New York for illegal safety claims in advertising of its pesticides.

"By misleading consumers about the potential dangers associated with the use of their products, Dow's ads may have endangered human health and the environment by encouraging people to use their products without proper care," New York Attorney General Spitzer said Monday.

Spitzer said the penalty involving the popular Dursban and other pesticides is the largest penalty in the nation's history for this type of case.

Dow AgroSciences agreed to the $2 million penalty, but admitted no illegal or erroneous advertising, said spokesman Garry Hamlin. He said the firm settled to avoid a costly court case.

Spitzer had alleged that Dow AgroSciences violated a 1994 agreement between the company and the state that prohibited advertisements touting the safety of its pesticide products.

"The 1994 agreement restricted our ability to support and defend our products," said Guy A. Relford, the company's head of litigation, "even if our statements were true."

For instance, Relford said, the old agreement was interpreted by Spitzer as prohibiting telling people that the federal Environmental Protection Agency had registered one of Dow's products as a reduced risk pesticide.

State Supreme Court Judge Joan Madden in Manhattan issued the consent order that requires the firm to pay the $2 million penalty, prohibits it from making safety claims about its pesticides, and requires it to start a compliance program. That program will include an internal review of all ads and future ads by Dow in New York state and removal of any safety claims. The company will also have to provide training to comply with advertising restrictions. [AP]
If Dow AgroSciences believed its advertising to be true, why didn't it fight for its right to make its claims until the bitter end? Why didn't it fight against New York corporate Czar Elliot Spitzer's plainly erroneous reading of its earlier settlement? (Spitzer lists every one of these claims as false and misleading. By Spitzer's apparent standards, every advertising claim could be held as misleading.) Does anyone truly believe that by giving Elliot Spitzer a $2 million settlement, Dow is not admitting to illegal or erroneous advertising?

There is no excuse for Dow AgroSciences capitulation. A businessman has every right to make truthful advertising claims. Such freedom is essential if a businessman is to be able to communicate the virtues of his products with potential customers. And every businessman’s commercial speech should be afforded the same 1st Amendment protections as his political speech—commercial motives should never be used as an excuse to place speech into an intellectual ghetto.

Yet it would seem Dow AgroSciences believes otherwise. The only justification Dow could possibly offer its investors and the public is that its executives are sniveling bedwetters too timid to defend their most basic rights. Given such cowardice, Dow’s investors would be well served to find themselves a CEO who is willing to fight for his business’s freedom of speech.

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