Communication Currents

Mergers and acquisitions often generate substantial stock premiums. As a result, investors pay great attention to news related to these corporate maneuvers. Any disclosure of information—particularly inside information—can provide certain parties an informational advantage and potential financial gains. Whole Foods Market, Inc. and Wild Oats Markets, Inc. were involved in an intense head-to-head competition in the premium natural and organic supermarket business across the country. In February 2007, Whole Foods and Wild Oats announced that Whole Foods would acquire Wild Oats, and on August 28, 2007, the merger was consummated.   

Before negotiations for this merger began, John Mackey, Whole Foods chief executive officer, posted pseudonymous comments on Yahoo’s financial bulletin board under the name of “Rahodeb,” a variation of his wife’s name, Deborah, criticizing Wild Oats and its management and cheering Whole Foods’ financial gains on the stock market. Mackey’s use of pseudonymous comments on online financial message boards to influence market forces in favor of his company just before its successful acquisition of Wild Oats highlights the need for changes to the present First Amendment commercial speech doctrine. We recommend the application of the New York Times v. Sullivan defamation analysis to commercial speech—requiring First Amendment free speech protection only for commercial speech that addresses “important public issues.”

Rahodeb’s unduly critical comments about Wild Oats and supportive comments about Whole Foods made bloggers suspicious, and some tried to uncover his identity. Rahodeb responded, “Another person who thinks my name is John (Mackey)! Well if you really believe I am John Mackey, you should probably pay more attention to what I say on this board. I would be the ultimate Whole Foods Insider!” Mackey’s identity was revealed when the Federal Trade Commission filed a lawsuit to prevent the merger of Whole Foods and Wild Oats on anti-competitive grounds.

Anonymous commercial speech is protected First Amendment free speech activity; however, the right to speak anonymously is a qualified right. The question becomes, then, when should someone be able to require the revelation of an anonymous commercial speaker’s identity? The law strikes a balance between the First Amendment right to speak anonymously and the duty of the government to protect unsuspecting citizens from harmful communication. In this case, the balance is between Mackey’s First Amendment right of free commercial speech versus the potential harm to investors caused by the skewing of the natural market forces at play. Because of Mackey’s position as a company insider, and because he certainly stood to gain financially, the balance in this case should be struck in favor of unmasking “Rahodeb” as Mackey. 

Having unmasked Mackey, the next issue to be addressed is whether Mackey’s comments expose him to potential liability or his comments are protected commercial speech. In 1975, the U.S. Supreme Court explicitly extended First Amendment protection to commercial speech.  Over time, as the commercial speech doctrine developed, the Supreme Court consistently showed a healthy skepticism of the disproportionate economic power that companies enjoy.  However, the court recently moved away from a skeptical view of the disparate power of corporate voices in the political arena toward treating citizens and corporations as equal participants with regard to free expression rights.  

The court made its most dramatic move in this direction in Citizens United v. FEC.  Essentially, the Citizens United court rejected the argument that corporations have an unfair economic advantage over the rest of us as corporations engage in our national political dialogue. Specifically, the court rejected the notion that corporations have “an unfair advantage in the political marketplace” because of “resources amassed in the economic marketplace”—noting the First Amendment’s protections do not depend on the speaker’s “financial ability to engage in public discussion.” 

So, now, when Exxon Mobil Corp., the world’s largest publicly held corporation when measured by revenue—a corporation that earns billions of dollars in profits each year—joins the national conversation on a given issue, the court states its voice should receive no more and no less First Amendment protection than an average citizen trying to engage in our national dialogue. Unfortunately, the reality is that meaningful participation in any national conversation is often hugely expensive, and only individuals or corporations with very deep pockets can afford to have their voices heard.  

Because of this disparate playing field, we argue for a commercial speech doctrine that preserves the right of commercial speakers to engage in important public issues, but one that also limits the potential impact of their often disparate economic power. Specifically, we argue one way to address the disproportionate economic and political power enjoyed by commercial speakers is to apply a variation on the New York Times v. Sullivan standard to all commercial speech—requiring First Amendment free speech protection only for commercial speech that addresses “important public issues.” Mackey, like other large company CEOs, represents the concept that not all voices carry the same weight. Mackey’s blogs publicly disparaging Wild Oats during the takeover negotiations gained national media attention because he was the CEO of a major corporation. His comments were not part of an important national debate and therefore should not receive First Amendment protection.