Freeganism, Crime and Supermarkets 1: Are freegans criminals?

Freeganism is this. What’s the law’s view on it? That was my question, and I found a very good article on the topic by Dr Sean Thomas in Legal Studies[1]. He suggested that a freegan accused of theft (Mr Droog) could argue that you cannot steal abandoned goods, but noted that in some theft cases rubbish has not been treated as abandoned. He therefore suggested a more fruitful defence would be to say that Mr Droog has not been dishonest under the Ghosh test[2], because there is no requisite ‘moral obloquy’ attached to freeganism. He suggested these things in a very full and nuanced way.

Dr Thomas is obviously sympathetic to freegans, and I must say that I am too. But I’m not sure his article which answers “Do freegans commit theft?” with “No” is all that beneficial to freegans. One, he argues that the ‘crux’ of the matter is that ‘freegans cannot be understood to be harming anyone’. This isn’t as obvious as Thomas seems to suggest. If I own a shop, I want you to buy from me. When you take things from my bin, you don’t buy them from my shelf. My economic interests are harmed. And also, harm is not the crux of the matter. No harm is a good reason not to criminalise an act, but is not correct to say that "no harm" means that a crime cannot have been committed, even when the conditions for criminality are fulfilled.

His analysis of the relationship between abandonment and honesty is more important. The person who openly takes the car that he honestly thinks is abandoned and the scuba-diving, dead-of-night golf ball taker look very different. But if the balls were abandoned, there can be no theft. Thomas points out how honesty and abandonment have been (wrongly) conflated by the courts to just be about naughtiness.

But herein lies the problem. Thomas makes it easier for Fyodor Plc to argue theft. They just need to put signs over there bins saying “this is not abandoned”. This would seal the deal on the abandonment point, and would make it harder for Mr Droog to argue that he was acting honestly.  Freegans would be left only with a “we’re good people doing no harm” 'defence', which I reckon is shoogly at best.

This is an issue of real interest. Freegans probably do a good thing. It would be a shame if they were thieves (and a recent case suggests they are). It’s also a shame that interfering with bins is an offence, as Thomas puts in a footnote. It must be true that in reality, prosecutions aren’t brought very often (it’s not great PR for Fyodor Plc to report freegans to the police). But, in my opinion, what we’re left with are policy questions, because the legal situation does not favour dear old Mr Droog. 

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[1] Legal Studies, Vol. 30 No. 1, March 2010, pp. 98–125

[2] Which I’ve discussed before, at: http://businessbehavingbadly.blogspot.co.uk/2012/04/scrapping-dishonesty-from-cartel.html

Executives in Prison

Some Bad Businessmen[1] do go to jail. But what’s that like? I am yet to find an academic paper, or even a decent newspaper article, that discusses actual experience of executives in prison in an in-depth way. The Guardian makes do with pictures of business people who are, or have been, in prison. The issue I'm interested in here is the bite of punishment. Does prison hurt executives more or less than the ordinary man-of-crime?

The argument for prison hurting businessmen more is that they had more to lose in the first place. They can be disqualified from being the directors of companies, ruining their working life before they hear the cell door shut. Even if they are not disqualified, one must assume it’s far harder to get a high-powered position when you’ve done time. Further, the typical image of a businessman conjures up family life and community respect, both of which are liable to be broken by a stint in jail. Maybe just being branded a criminal - and it's associated shame and career damage -  is punishment enough in their sphere of existence.

The counter argument could just run the way Sir Ken Macdonald put it on a (very interesting) BBC Radio show (now offline). On it, he said it was disgusting to argue that as richer people came from communities where family and reputation counted more, corporate criminals should be treated more leniently. But with respect, until studies are done, that’s not a ridiculous starting point. If prison is part-and-parcel of your community’s life, going inside is not the same culture shock as if it is really alien. Of course, you can say that if you have done something really bad, you deserve it, and elsewhere we will discuss the metrics of badness of white collar crime. But here, assuming Mr Businessman and Mr Carjacker have done equally bad things, maybe prison is a worse experience for Mr Businessman. This of course must be caveated - this general idea has to be applied on a case-by-case basis. 

Other, more nuanced, complaints about the treatment of Bad Businessmen exist. Some include the idea that white collar criminals ‘get away’ with an easy life in open prisons, find it easier to conform with prison rules, and get more respect from staff than common-or-garden criminals. But then, conforming to rules should be rewarded, should it not? And, once in prison, it’s hard to see what danger is being posed by white collar criminals such that they should be in cells.

We come across scenarios all the time where wrongdoers’ means and backgrounds are considered in their punishments. Fines from the FA are set very high, because fining a footballer £200 is like fining me 2p. It might be unpalatable that to inflict equal punishment, white collar criminals should have more lenient sentences, but that is an indictment on social inequality, not a reason to punish in a de facto harsher way. 

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[1] My use of ‘executives’ and ‘businessman’ is broad and loose, as defended here. And if anyone finds an in-depth article on this idea, let me know!

Name Calling - 'White Collar Crime'

When I was checking that calling this blog ‘business behaving badly’ wasn’t an unintentional rip-off of any other regular blog/journal/feature, I came across this interesting and broad ranging speech by Christopher Craige, the Director of the CDPP in Australia. It covers many interesting ideas, and is aimed at an audience who knows a thing or two about law and/or crime, but not a huge deal about corporate crime. It is therefore aiming at the same market as I am, and with the same name. I’m pretty sure he won’t mind me using the title for a blog 4 years later.

I also hope he won’t mind me disagreeing with him on one issue. He writes:

In the early 21st century I suggest we can be far more robust in adopting a language that defends and nurtures the free market system whilst saving it from its own excesses. The continued currency of the term “white collar crime” is now unhelpful in this task. Any lingering implication that there is a more benign variety of crime, arising from genteel origins of some corporate perpetrators can surely now be dismissed. Language of this kind is an impediment to retaining community confidence that we have clear-eyed legislative, regulatory, prosecutorial and judicial responses to what are in essence very serious and harmful crimes committed by people in positions of trust and advantage. It is an aggravating fact in a contemporary setting when such crimes are committed by people in the course of occupying very high positions of authority in business.

To have a problem with the term white collar crime is not unique. I didn’t want it in the title of my blog, but not for his reasons.

First, I would argue that the ‘lingering implications’ of ‘genteel’ or ‘benign’ crime are not all that strong. As the trend of developed nations is to take firmer stances towards such behaviour, the umbrella name must matter less. Relatedly, the words ‘white collar’ don’t need to mean gentility.

In fact, the reason I disagree with Craigie is part of the reason I didn’t want to use the term myself. It is vague and its parameters are unclear. David Nelken[1] devotes some time to working out what white collar crime might be. He shows very clearly why the ‘original’ definition given in 1949 by Sutherland[2] pretty hopeless. A crime committed by a ‘person of high status in the course of his occupation’ tells us so very little about what might be going on – it could be financial crime, competition law offences, manslaughter, or whatever. Some scholars have included non-criminal behaviour in ‘white collar crime’ -Sutherland among them. The definition doesn’t help us decide whether any given practice falls within the definition.

If then, the definition is vague, and we can’t apply it easily, because it’s so nebulous, then I find it hard to believe there can be much in the way of lingering connotation. Because it is at once definitive sounding and nebulous in reality, I didn’t want it in the title of my blog. I didn’t want to try and defend whatever I discussed as falling within its ‘meaning’. Instead, I’ve used my own (and Craigie’s!) title.

We could do away with the ‘white collar’ term, if we could convince everyone to rip up lots of textbooks. I don’t think we really need to. In all its cloudy fug, devoid of strict academic meaning, it does at least wave us in the general direction of a group of offences. With time, what comes under white collar crime may well crystallise. And it is useful to have a name or label for a set of offences. The set that Craigie wants to refer us to is not so easily caught within a definitional parameter like, say, sexual offences or traffic offences. If we do away with ‘white collar’ crime (or ‘corporate crime’ – which arguably isn’t a great name either) then we are just left with ‘crime’, which is more useless; or we have to think of a new name. 

Given how hard it is to define the contents of the rather flexible title ‘white collar crime’, one runs the risk of naming something into definition. For example, something like ‘elite crimes’ looks like it rules out any struggling businessman, where ‘white collar’ does not. Further, terms like ours (BBB) are equally nebulous. I only used it because it was nebulous enough that I didn’t have to compare my definition to anyone else’s!

And whatever we call it, who’s to say that lingering genteel and benign connotations would be banished – in talking about competition law it was once said it’s theft by men in nice suits[3]. If there is an element of gentility in these types of behaviours, we can’t oust it simply by using a different name!

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[1] In the Oxford Handbook of Criminology. His discussion is very much fuller than mine.

[2] In a book called ‘White Collar Crime’

[3] I can’t now remember by whom. 

Ethical Question of Economic Competition

I read an article by Jonathan Wolff in an applied ethics textbook. There, he tackles the 'seldom asked' question of the ethical difficulties created by having economic competition, the hallmark of free market capitalism. Why is it OK to intentionally inflict economic harm by opening a shop next to your rival’s, but not OK to steal?

Wolff ponders the idea that when we act as consumers, we might be exploiting producers. We only want them to compete to provide the side effect of lower prices and better quality. It’s a competition we want no one to win (as monopolies affect our own interests).

He rejects the defence that producers are voluntarily taking part in the competition; exploitation often includes some sort of willingness. He doesn’t think that it’s a defence to say producers also act as consumers. He only sees a defence in the idea that we, as consumers, don’t sufficiently disregard producer interests to make us exploiters. The welfare state and bankruptcy laws support those producers (business owners and employees) who fail or flounder.

He then goes on to say that we, as consumers, do exploit those producers who, for reasons of their own domestic situation (read: live in developing countries), don’t have sufficient safety nets. Those are the people whose lives we sufficiently disregard as we pursue our own ends.

I hope Wolff is right when he says the questions he tackles are usually unasked, otherwise I have a bit more reading to do before I can comment on his article. But here are my thoughts.

First, is that the ethical side to capitalism is not always ignored. Wolff recognises that socialists and Marxists do consider it, and they consider it well – see G.A. Cohen for an exemplary piece about how fear and jealousy are the driving capitalist emotions.  Second, I don’t think he deals well enough with the idea that the exploited employees and the exploiting consumers are the same people. How can a society all be exploiting itself? Maybe this criticism works less well in his true exploitation scenario. My third criticism would be that Wolff starts off thinking about the ethics of competition generally, a big and interesting topic, and moves to say that we exploit third world producers, a point that, however well made here, has been made many times before. My fourth criticism is that he’s a tiny bit wrong when he says we don’t want anyone to win the competition. Current competition law (in theory and practice) has no problem with monopolies per se. This leads to the fifth problem. Competition rules are to try to benefit society, and he doesn’t  really engage on what is the better option. Are minimum wages really enough to salve our consciences? There is still, on his account, a degree of exploitation. My sixth (and a very minor) issue is that he never makes explicit why stealing is worse than competition (there are no or few beneficial side effects of letting people steal).

But more importantly, I think, is where he places the blame. If me buying a shirt from Fyodor Ltd is part of a global system of capitalism whereby Mr. Droog in another country loses out, why am I to blame? If Mr Droog is Fyodor’s employee, then surely the primary exploiter is the one who is paying under-the-odds for labour so as to make profit for themselves. And if Mr. Droog works for Dostoyevsky Ltd, and they go bust in some other country because I bought a shirt from their rivals, are there not sufficient other actors to blame before going to consumers? Directors at Dostoyevsky for failing to take the best decisions? Directors at Fyodor for gaining an unfair advantage by undercutting or being anti-competitive? The civilians and politicians of the other country for failing to provide the safety net? The international political community for failing to find globally applicable minimum standards that are enforced?

I think the problem is his focus on exploitation. He explicitly recognises that it is the competitors who do harm to each either, and we encourage it. But it is that encouragement that is exploitation as he defines it. The initial harm doesn’t fit the exploitation definition that he’s discussing.

Business ethics are a tricky field, and it’s not a bad thing for consumers to remember the knock-on impact of their choices. But to focus on them, and forgetting the other actors, seems to me to be focussing on the addicts, not the dealers. 

(Discussion of 'Economic Competition: Should We Care about the Losers?', Wolff, in Hugh LaFolette (ed) Ethics in Practice, 3rd Ed.)

Scrapping 'Dishonesty' from the Cartel Offence

Section 188 Enterprise Act 2002 provided that:

An individual is guilty of an offence if he dishonestly agrees with one or more other persons to make or implement, or to cause to be made or implemented, [cartel] arrangements [between at least two companies].

I wrote last time about the different situations in the US and UK. I mentioned that the UK wasn’t a great criminal enforcer of competition law infringements, and that this ‘cartel offence’ wasn’t doing a great job.

Well, maybe that’s about to change. The Government has decided that it wants to scrap the ‘dishonesty’ element of the offence. This might be good news in that:

•   We might see more prosecutions.
•   Those prosecutions are more likely to be successful.
•  As such, the offence will have more ‘bite’ and thus be a better deterrent.

This is because the dishonesty test is one that comes from case law (R v Ghosh[1]), and it is arguably a bit tricky to apply to ‘complex’ commercial agreements. Ghosh needs the defendant (D) to fall below the normal standard of honesty (objective test) and to know he was being dishonest by that standard (subjective test). A jury member knows what he thinks of theft, he might not know how dishonest he considers cartelling. And this will affect both whether he believes cartelling is dishonest by reasonable standards, and also whether he thinks D would know that.

On the other hand, we could be worried, in a couple of different ways:

• Serious offences should always have a ‘mens rea’ element – D needs to have a sufficiently guilty mind. This isn’t a parking ticket, this is five years in jail – D needs to be wilfully bad.
• The reason we weren’t prosecuting often or successfully enough was because the body responsible (the OFT, soon to be merged with the CC) lacked expertise and experience.

These skirt the fundamental issue. It is the more woolly issue of to what extent we should criminalise anti-competitive conduct. Getting rid of dishonesty widens the offence, both in law and in fact. Some conduct that previously wasn’t criminal now would be. Some conduct that was criminal but too difficult to prove will be easier to prove. I don’t know where the limits should be. But I am a little worried that the global trend to tougher enforcement means that we’re making tougher and tougher laws without fully exploring how well the original law could ‘work’ at limiting anti-competitive conduct whilst still being careful that we don't over-penalise those who engage in that conduct.

 Further, in this particular case, we’ve bypassed the need to explain to the public, or persuade a jury, that price fixing is dishonest. As a result, the cartel offence makes scant effort at earning its place in the public conception of what is ‘wrong’. Another time, I’ll write a comment on public attitudes to anti-competitive practices. It will be tightly related to this piece.

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[1] [1982] EWCA Crim 2

Competition Law and Criminal Enforcement (on either side of the Atlantic)

Competition law is one of the major reasons why this blog is called Business Behaving Badly, and why I try to focus on naughtiness, harms and wrongdoing rather than corporate (or white collar) crime. In Europe, competition law is largely a regulatory scheme based on fines, and with a few individual carved-out exceptions, is not ‘criminal’ law. However, in other jurisdictions, notably the US, criminal enforcement of competition law is far more widespread.

This reminds us that crime is ‘socially constructed’; that we have to think very carefully about what conduct we want to consider as criminal; and the fine distinctions between systems that can yield different results.

Here, we’ll simply look at the competition/criminal law interface either side of the Pond, and I’ll speculate as to why those differences exist.

The US

The US is the granddaddy of competition law – the law that regulates practices contrary to the market competition that is fundamental to a capitalist system[1].

According to the US Department of Justice (DOJ), cartelists are ‘generally prosecuted criminally’, whereas those who, in EU parlance, abuse a dominant position are generally dealt with in civil law. Criminal prosecutions can lead to corporate fines of up to $100million (or twice-the-gross-gain resulting from the violation), individual fines up to $10million, and up to 10 years in jail (I often wonder what the world would look like with a base-12 counting system).

In the US in 2010, the average jail term for these offences was 30months, and a total of 26,046 days were spent in federal jails for antitrust violations, equivalent to 71 people spending their whole year in jail. Fines reached $555million, down from $1billion the year before.

The UK and the EU

In Europe, criminal law plays a far smaller role. The European Commission is the major competition law enforcer, and it does not impose criminal sanctions. Instead, it administers fines (or sometimes behavioural and structural orders) to companies that violate the relevant provisions.

Member states still have a role to play, and indeed, the national competition authorities (NCAs) increasingly work better with each other and with the Commission. And some states have criminal sanctions available.

The UK has one – the Cartel Offence. It originally provided that an individual who dishonestly agrees to engage in hard-core cartel activity (price fixing, bid rigging, etc) could face five years in prison, and/or an unlimited fine. So far, there has only been one successful prosecution, in R v Whittle (Peter) [2008] EWCA Crim 2560, and in that case, all three defendants admitted guilt. In fact, the case is more interesting in looking at difficulties where actors violate competition laws of different countries. In Whittle, the three defendants had been arrested in the US, and had made plea bargains there. The dishonesty element is being scrapped, which we’ll talk about next time.

Why the Differences?

So why are the Americans keener on criminalisation? I will suggest four reasons, all quirks of history. No doubt other reasons could be found.

1. The US got their first. The DOJ says, criminalisation is the best deterrent to cartelists. The global trend in enforcement is to states using ever tougher deterrent. It is unsurprising that the first big economy to deal with competition law got to the fiercer deterrents first.
2. The EU. The EU is the prime actor in European competition law, but it doesn’t have competence to create and enforce criminal law. This stems from the EU’s history as an economic union, and so certain issues of political sovereignty have not been ceded. Criminal law is one of the most sensitive. Instead, various countries have begun their own piecemeal processes; but they have not been the prominent enforcers in the past, and there remains concern about how varying offences can co-exist in the EU – both as to consistency and the problem of double (or multiple) jeopardy.
3. Criminalising culture. The US is more predisposed to locking people up. It has, by far and away, the highest rate of incarceration in the world. Land of the Brave, maybe, but a lot of US ‘homes’ aren’t all that fussed with ‘freedom’. That may or may not be a good thing.
4. The US has more private enforcement – my Uni notes say that in the US, 90% of competition cases are not brought by the regulators, versus about 15% in the EU. This must affect the balance of enforcement, and maybe pushes the state away from adding fines to damages, and instead encourages penal enforcement.

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[1] That is sweeping. The economics underneath competition law is complicated, and some argue competition law is contrary to the guiding hand of a true free market. Less extreme positions still challenge some competition law rules, which, it can be and is argued, actually chill or prevent competition and could harm consumers. In a quiet moment, I'll try and summarise competition law on here. 

Vodkat

Lawyers all over the interweb refer to themselves as ‘Carbolic Smoke Ball’ or name themselves the ‘Man on the Clapham Omnibus’ after favourite or famous cases. Apologies if you do, or you know someone that does, but that is pretty tragic.

Unfortunately, I also have cases I like. One is Diageo v ICB, the Vodkat case. It’s one that shows law working in the real world, involves alcohol, and a dose of pragmatism. And it shows naughtiness that is a public interest concern being dealt with in a private law dispute.

The facts are that ICB, a drinks manufacturer, sold a 22% abv drink as ‘Vodkat’, in a clear bottle with red labelling. It looked like vodka, but wasn’t – EU rules dictate what constitutes vodka. For one, it has to be at least 37.5% abv.

Diageo, makers of Smirnoff vodka, claimed that Vodkat was ‘passing itself off’ as vodka. This was a claim in tort. They were seeking an injunction (a court order to ICB to stop packaging its drink as it was). To prove a claim in passing off, Diageo had to show the following:

1. That ‘vodka’ had a reputation as a class of goods.
2. That ‘Vodkat’ misrepresented itself as vodka.
3. That Diageo had suffered damage – through lost sales caused by the misrepresentation, or damage to the reputation of vodka. 

They succeeded. Now, the judgment is interesting because maybe it extends the tort of passing off (the old cases were of producers ‘passing off’ as producers of specialist classes – e.g. Swiss chocolate), and because there was argument over what sort of injunction to give. Funnily enough the qualified injunction didn’t make Vodkat change its name immediately, but they did anyway. You can now buy ‘V-Kat Schnapps’ in clear bottle with black and gold labelling, sold near other schnapps and liqueurs in supermarkets. Just in case you want to drink the enviable mix of water, fermented alcohol and distilled alcohol. Mmmm.

But think on this. This is a private action, raised by one company against another. But how much did Vodkat really affect Diageo? As the judgment explained, not that much. Diageo’s Smirnoff is a relatively aspirational brand. Vodkat was and is competing against brands like Glen’s and cheaper own-brand supermarket vodkas. Diageo, it must be assumed, were worried about protecting their position into the future, by setting a strong legal precedent as to what was acceptable. They don’t want any Tom, Dick or Vladimir to start selling below-strength spirits that do impact on Smirnoff’s sales.

You could argue, though, that Diageo should not have needed to intervene. Maybe passing off should be a regulated domain. If Vodkat had called itself Vodkat Vodka, then it wouldn’t have made it to the shelves, falling foul of the vodka definition as enshrined in EU law. In other spheres, pretending to be what you’re not is regulated – pretending to be a doctor or a lawyer or person qualified to give financial advice. More generally, you can be commit fraud  by misrepresenting who you are.  Fraud is such a widely drawn offence that maybe that is the best analogy, given that the elements of that offence are simply:

1.       A dishonest representation...
2.       with the intent to make a gain or cause a loss (widely defined).

You can see that these are not far from what Vodkat did. The only difficulty would be dishonesty, which is not a requirement in passing off, and so was not discussed. Indeed, Diageo did not submit that ICB ‘intended to deceive’. But, why would they submit otherwise? They didn’t need to. 

I’m not saying ICB were fraudulent. Besides, fraud might be the wrong vehicle for this case. Fraud might be cast too wide generally speaking. My point is the broader and more general one that as the law stands, this private business dispute wrapped up with terms like ‘goodwill’ (‘the attractive force that brings in custom’), cachet and ‘deceptive competition’ is not a million miles away from fraud. As it is, ICB changed a label and paid some costs, and no one is dealt with criminally. 

Diageo v ICB [2010] EWHC 17 (Ch) affirmed in [2010] EWCA Civ 920.