Magazine Winter 2016 Research Feature

Using Social Media in Business Disputes

Until recently, the mere threat of litigation and the prospect of a prolonged and costly lawsuit was often all that it took to persuade a smaller business to acquiesce to a larger competitor’s legal demands. But that’s changing.

David Orozco Reading Time: 7 min 

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Elon Musk

Tesla Motors Inc. is using “lawsourcing” techniques to challenge regulations that restrict the sale of electric cars cars directly to consumers, leveraging company CEO Elon Musk’s strong social media presence.

Image courtesy of Flickr / Heisenberg Media

Large companies frequently exploit their vastly superior legal resources and capabilities to the disadvantage of smaller competitors. Frequently, the mere threat of litigation and the prospect of an expensive, prolonged lawsuit is all that is necessary to persuade a smaller business to acquiesce to the larger competitor’s legal demands. However, I have recently studied an emergent defensive strategy that turns the tables on large companies when they legally threaten smaller enterprises. The approach involves soliciting public support, typically through social media and public relations, in hopes of achieving a favorable outcome. I call this technique “lawsourcing.”1

Lawsourcing in Practice

The idea of lawsourcing — a variation of what is often referred to as “crowdsourcing” — isn’t completely new. Back in 1984, when Vermont-based Ben & Jerry’s Homemade Inc. was a six-year-old upstart in the ice cream business, the Pillsbury Co. (then the owner of the Häagen-Dazs ice cream brand), attempted to curtail the growth of Ben & Jerry’s by pressuring some distributors to become exclusive distributors and not to handle Ben & Jerry’s products. Ben & Jerry’s fought back hard, with a scrappy campaign built around the slogan “What’s the Doughboy Afraid Of?” Founders Ben Cohen and Jerry Greenfield plastered their slogan on bumper stickers, the sides of buses, and airplane banners, and they posted a toll-free number on their ice cream containers. Pillsbury backed down, but not before Ben & Jerry’s captured what one writer called “a generous scoop of free publicity for its guerrilla tactics.”2 (Cohen, in fact, was quoted as saying, “They tried to fight us in court, but we fought them in the public’s mind instead.”)

Lawsourcing campaigns can provide significant benefits, including greater brand awareness and loyalty and increased sales. In recent years, social media and modern technology have provided a powerful platform and a set of tools for companies that want to fight back. By leveraging public support, companies can advance their legal and public-relations goals. Consider the case of Hampton Creek Foods Inc., a small San Francisco-based food producer.

Topics

About the Author

David Orozco is an associate professor of legal studies at the College of Business at Florida State University in Tallahassee, Florida.

References

1. D. Orozco, “The Use of Legal Crowdsourcing (‘Lawsourcing’) as a Means to Achieve Legal, Regulatory and Policy Objectives,” American Business Law Journal 53, no. 1 (forthcoming in 2016).

2. J.P. Kahn, “The Inc. 100 Portfolio,” Inc., May 1986, www.inc.com.

3. A.C. Kaufman, “Hellman’s Mayo Drops Lawsuit Against Eggless ‘Just Mayo,’” Huffington Post, Dec. 19, 2014, www.huffingtonpost.com.

4. See U.S. Food and Drug Administration warning letter to Hampton Creek Foods, Aug. 12, 2015, www.fda.gov; see also M. Koren, “The True Meaning of Mayonnaise,” The Atlantic, Aug. 25, 2015, www.theatlantic.com.

5. J. Bidgood, “Chicken Chain Says Stop, but T-Shirt Maker Balks,” New York Times, Dec. 5, 2011, A12.

6. A. Thurlow, “Challenge to Craft Beer Taprooms Is Withdrawn,” Jacksonville Business Journal, Jan. 28, 2015.

7. R. Wilson, “Auto Dealers Move to Block Tesla Sales Model in State Capitals,” Washington Post, March 12, 2014; see also Orozco, “The Use of Legal Crowdsourcing (‘Lawsourcing’).”

8. C. Dougherty and M. Isaac, “Airbnb and Uber Mobilize Vast User Base to Sway Policy,” New York Times, Nov. 5, 2015, B1.

9. “TEDxSIT: Bo Muller Moore ‘Accidental Activist,’” Youtube video, June 17, 2012, www.youtube.com.

10. D.P. Baron, “The Nonmarket Strategy System,” MIT Sloan Management Review 37, no. 1 (fall 1995): 73-85.

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Comments (5)
Kerri Smith
I'd like to see an analysis of the degree to which large companies are already playing this Social Media PR game without an external threat they have to beat back down into submission with heavy legal threats - and the influence they yeild due to their large budgets as a normal (probably tax deductable) cost of doing business? Same goes for the Alphabet Agencies - obviously paid trolls galore on all manner of web chat sites, certainly not limited to social media, all to influence and distract from actual issues be they greenwashing, profit camoflage or opinion steering, this is pro-active 'lore-saucing'. Interesting article, food for thought (pun intended).
Hitesh Bagchi
Interesting point of view! 
Social media can truly turn out to be a deterrent to large corporations filing mindless lawsuits. At least this will level the playing field and ensure a more transparent and competitive marketplace. Ultimately, the consumer wins.
Are there counter examples? E.g. a lawsuit that had to be withdrawn because of social pressure but had merits from a legal viewpoint. Or large corporations using social media to garner public support.
Drury Grigsby
Interesting article. Certainly valuable where large companies apply significant pressure to small or newer competitors invisibly through the legal system or by creating barriers to entry through government regulations. Prior to social media, this same approach of "pulling back the curtain" was much more expensive and tedious. It should be noted that the moral high ground is not always with David over Goliath. Sometimes, hard fought-for consumer protections can come under attack by new business models. Social media can also facilitate deeper discussions here, as well.
Leslie Brokaw
Thank you for your query, Urs. The more accurate description of Professor Orozco's research is that the strategy is being used by both upstart players facing established competitors and by newcomers facing government regulators. His examples of Tesla, Airbnb, and Uber fall into the "newcomer vs. govt regulator" category. The article also includes several rich examples of much smaller companies that have used lawsourcing successfully. We will edit our description so that it's clearer!

Leslie Brokaw
Digital Contributing Editor
MIT SMR
Urs Gattiker
This is an interesting article however, in the teaser it says:

"An emergent defensive strategy is turning the tables on large companies that threaten smaller enterprises with legal action. Companies such as Tesla, Airbnb, and Uber have used "lawsourcing" "

How these companies could be used as examples of small firms is a bit of a mystery to me. Can you please clarify?

If they are not small, how should they be used as examples for small firms?

Respectfully
Urs
http://blog.drkpi.com/tag/research-methodology/