How Fair Trade Litigation Will Help Multinationals Stomp on Small Business
The competition among advertisers for "fair trade" certification has produced its first litigation -- a hint of things to come as big multinational companies try to fend off smaller ones over claims that their goods exploit the environment and Third World producers less.
Fair Trade claims can be found on everything from Monkee Jeans (certified by the Soil Association, allegedly) to gold. The market for Fair Trade branded goods is growing at 15 percent a year and is worth an estimated €3.4 billion worldwide.
In June, Dr. Bronner's Magic Soaps won two decisions from an advertising watchdog that set the stage for competing claims about who can and cannot use the words "fair trade" on their brands:
- Cosmetics company Avon agreed to modify advertising for its "mark." line of products so as not to overstate the fair trade benefits of its makeup.
- TransFair, the company that licenses the "Fair Trade USA" certification, agreed to modify the language behind its seals to make it clearer to consumers that some cosmetic products bearing the "Fair Trade Certified" seal from TransFair contains only 2-5 percent fair trade ingredients.
The litigation, which took place at the Council of Better Business Bureaus National Advertising Division, is striking in its resemblance to the cases in which big companies such as Procter & Gamble (P&G) stomped on smaller "green" companies such as Seventh Generation by making them tone down their environmental claims.
In both fights, the advantage will eventually go to the companies with deeper pockets, despite upstart Dr. Bronner's (which makes those weird bottles of soap that are covered in dense inspirational text) beating the mainstream Avon in this case.
It's not just the litigation, it's the expense of getting a Fair Trade seal. Companies must submit to inspections and audits, source their goods from suppliers who are not taking advantage of near-slave labor, and submit to random inspections. Fair Trade USA does not say on its web site how much this all costs, perhaps because if you have to ask you probably can't afford it. Some academics are already worrying that the expense of Fair Trade seals are crowding out small businesses.
If that's true, it's a classic example of good* corporate strategy: If you have a larger warchest than your competition, then raising the barriers to entry by making competition more expensive -- in the form of lawsuits and fees for special approvals -- is to your advantage, even if it's costly.
*Good meaning successful, not rightful.
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