General Mills, the food giant that owns Cheerios, Häagen Daz and Green Giant, is breathing a sigh of relief after it suppressed a press release suggesting the US government was about to mount a full-scale investigation into its supply chain. The release was a hoax, but General Mills has no room for complacency. The threat of political interference in the food business could be very real if we extrapolate what the government has been doing to BP.
I owe the originality of this insight to the Financial Times’ John Gapper. Gapper’s argument, laid out in a column this week, is as follows. “Slick Willy” Sutton, the infamous armed robber, once observed that he raided banks because – that’s where the money is. In the same manner, US politicians – aware that they have to address a yawning budget deficit if they are to be re-elected – are casting around for easy money to plug the gap. Voters, impoverished by Wall Street’s scandalous behavioiur, don’t have it. But dividend-rich companies, like BP, do.
BP, of course, had it coming to it. Its behaviour in the Gulf of Mexico can be described as neither caring nor competent. That, however, is not the point. It is the ease with which Congress and Obama have been able to extract $20bn – none of which is ever likely to be returned to the company – that should be worrying shareholders everywhere. There is no fixed liability associated with this sum and – like blackmailers the world over – politicians will come back for more if they think they can get away with it.
To Gapper, the BP concession has echoes of the 1998 tobacco settlement, in which the industry paid $246bn to various states following legal action by their attorney generals. It’s worth quoting him more fully here: “Only 5% of tha money was spent on tobacco-related initiatives with Virginia, for example, investing in higher education, fibre optic cables and research into energy.”
Now let me see, which other big-dividend paying companies could land themselves in a pickle with the state over litigation liability? Gapper thinks the list is comprehensive and cites energy providers, drugs companies and consumer goods companies. I think two on his list stand out particularly prominently: the food and alcoholic drinks companies.
Imagine, for example, what might happen if scientific evidence conclusively proved that many of the big food companies had been slowly poisoning us to death through the use of (now largely discontinued) hydrogenated fats? Or what about excessive sugar and salt in cereals directly leading to premature cardio-vascular impairment? The legal fall-out, through class actions, could be stupendous. And lining up behind the lawyers would be the politicians waiting for a big, fat hand-out, or else. After all, it could be argued, a massive amount of taxpayers’ money has, historically, been funnelled into dealing with the collateral medical issues: time for industry to pay back the “subsidy”.
All the more could these arguments be applied to the side-effects of excessive alcohol consumption. The history of the tobacco industry suggests that free will and individual responsibility weigh little in the balance once these matters come to court.
And where the US leads, little Britain surely cannot be far behind.