Boycott

THE FEDERAL Trade Commission (FTC) ruled in 1998 that toy retailer Toys “R” Us had, in the late 1980s and 1990s, engaged in an illegal boycott of warehouse clubs by indicating that it would not do business with toy makers who also did business with the clubs, thereby coercing manufacturers to institute a boycott of the warehouse clubs. Toys “R” Us was the major toy retailer, controlling more than 40 percent of the market. Both the threat to withhold business from the manufacturers and the attempt to force other toy suppliers to boycott the warehouse clubs were illegal boycotts under antitrust law.

The term boycott is named for Captain Charles Cunningham Boycott, whose ruthless evictions of tenants in Ireland in 1880 provoked his employees so much that they refused to have any dealings with him or his family. In the United States, the principal historical use of the boycott has been in labor disputes, but consumer and business groups have used it as well.

Not all boycotts are illegal. Generally, a primary boycott is legal. The primary boycott is, as in the example of Boycott's employees, a refusal to have dealings with the offender. For instance, protesting employees and their sympathizers might refuse to use an employer's goods or services, as in the 1960s boycott of table grapes by the United Farm Workers Organizing Committee and sympathetic consumers. The primary boycott is legal and accepted practice because, although it attempts to use economic means, its ultimate goals are political or social.

Another form of legal boycott, defined as Constitutionally protected speech exempt from the Sherman Antitrust Act, is the boycott of government when there is no economic motive. The government is not a competitor or a customer or engaged in any commercial relationship. And the Constitution always overrides mere legislation.

The secondary boycott is an attempt by the offended party to coerce a third party into joining the boycott, or to boycott that third party if it does not join. This is the type of boycott that the Federal Trade Commission (FTC) found Toys “R” Us had engaged in. Initially, the Sherman Antitrust Act outlawed both types of boycott. Section I of the act defined price fixing, agreements to share markets, and combinations to boycott as pernicious restraints of trade that were absolutely illegal.

A combination could consist of as few as two persons (individual or corporate). The Danbury Hatters' Case (Loewe v. Lawler, 1902) arose when the hatters' union boycotted the products of a Danbury, Connecticut, hatmaker. The manufacturer sued, and the court ruled in 1908 that the boycott violated the Sherman Act and that the individual members of the union were liable for treble damages. Not until the Norris-LaGuardia Act of 1932 did unions find relief, and that lasted only until the Taft-Hartley Act (1947) and the Landrum-Griffin Act (1959) reestablished the prohibition on secondary boycotts. Although the laws remained in effect into the 21st century, enforcement was rare.

When the federal government used the Sherman Act to break up Standard Oil in 1911, the U.S. Supreme Court ruled that the oil monopoly was clearly a violation of the act, but Chief Justice Edward D. White's court softened the law by establishing the concept of reasonableness.

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