Multinational Monitor

NOV 1998
VOL 19 No. 11


Oligopoly! Highly Concentrated Markets Across the U.S. Economy
Amy Taub and Robert Weissman

Terminator Seeds: Monsanto Moves to Tighten Its Grip on the Global Agriculture
by Hope Shand

Financial Deregulation Fiasco: HR 10 and the Consequences of Financial Concentration
by Jake Lewis


The Microsoft Monopoly
an interview with
James Love


Behind the Lines

Breathing Life Into Antitrust Policy

The Front
Sweating a Labor Rights Deal - Arbitrary in Alabama

The Lawrence Summers Memorial Award

Money & Politics
A Connected Industry

Names In the News


The Front

Sweating a Labor Rights Deal

Undermining a celebratory announcement, two unions and a public interest group that were part of the White House-brokered Apparel Industry Partnership have balked at a deal reached in November between apparel companies and some public interest groups.

The Apparel Industry Partnership proposal will create a new organization, the Fair Labor Association (FLA), with a board equally divided between business representatives on the one hand, and labor and public interest organizations on the other.

The FLA will accredit independent monitors to determine if companies are meeting a Workplace Code of Conduct. The Code prohibits forced or child labor (by children under 14 or 15), bans harassment or abuse of workers, recognizes employees' right to organize and sets a maximum 60-hour work week.

Employers that are certified as in compliance with the Code of Conduct will be able to tout the FLA's seal of approval.

Negotiators from the corporate side were Liz Claiborne, Nike, Reebok, Phillips Van Heusen and Business for Social Responsibility. Also signing on to the FLA deal were L.L. Bean, Patagonia, Nicole Miller and Kathie Lee Gifford.

Public interest signers were the Lawyers Committee for Human Rights, the National Consumers League, the International Labor Rights Fund and the Robert F. Kennedy Memorial Center for Human Rights.

The agreement was warmly endorsed by the Clinton administration.

"This agreement is a historic step," said President Clinton. "We must measure our progress by how we change and improve the lives and livelihoods of apparel workers here in the United States and around the world. That is why I urge more companies to join this effort"

But the deal was denounced by the two unions that had participated in the negotiations - UNITE, which represents apparel and textile workers, and the Retail, Wholesale and Department Store Union. The Interfaith Center on Corporate Responsibility (ICCR), another member of the Apparel Industry Partnership, also refused to sign the deal.

Fatal Flaws

The agreement suffers from "fatal flaws," said UNITE in a statement. The agreement "takes no meaningful step toward a living wage; it does not effectively address the problem of protecting the right to organize in countries where the right is systematically denied; it allows companies to pick the factories that will be inspected by monitors chosen and paid by the company and excludes up to 95 percent of a company's production facilities from inspection; and it creates multiple barriers to public access to information."

"The Fair Labor Association neither represents labor nor is fair," says Medea Benjamin, co-director of the human rights group Global Exchange. "This agreement will allow corporations to continue paving poverty wages, violate labor rights and hide their factories overseas."

The deal does not recognize the right of workers to a living wage, the most basic of demands. It was this crucial issue that probably generated the most criticism of the deal.

"The agreement provides for a study of wages," says Rev. David Schilling, who represented the ICCR in Partnership negotiations. "But it does not commit participating companies to pay a sustainable living wage in apparel and footwear plants around the world. A factory may be clean, well organized and monitored, but unless workers are paid a sustainable living wage, it is still a sweatshop."

The ICCR also notes that, while the agreement calls for the U.S. Department of Labor to compile wage data, it does not empower the Fair Labor Association to conduct studies to determine what would constitute a living wage in different markets.

There are also serious questions about the deal's provisions involving recognition of employees' right to organize.

The deal's code of conduct establishes that "Employers shall recognize and respect the right of employees to freedom of association and collective bargaining."

Assuming this provision has any meaning whatsoever - and given widespread disregard for labor rights even in the United States, this is a debatable proposition - it is very unclear what effect it would have in countries where governments do not respect workers' organizing rights (including, most importantly, China). The Apparel Industry Partnership agreement says that in these Countries, companies and their contractors "shall not affirmatively seek the assistance of state authorities to prevent workers from exercising these rights."

In a scaring commentary, UNITE argued, "This presumably means you can let the army in the door, but you can't call them."

The unions and labor rights groups have raised a number of other concerns as well, including: the de facto power by a small group of employers to exer-cise veto power over important Fair Labor Association decisions; the right of companies to use the same accounting firms they now use for labor rights monitoring, including firms that perform other services for the company; and a general reliance on company-controlled information to determine compliance with the code of conduct.

A Positive First Step?

But several legitimate labor right, supporters nonetheless found the agreement worth accepting.

"This project formalizes broad social participation in improving workplace conditions in countries where neither law nor collective agreements are effective," says Pharis Harvey, exec-utive director of the International Labor Rights Fund. Harvey says lie hopes that the unions and groups which chose not to endorse the deal will nevertheless work to hold it accountable to contributing to the goal of eliminating sweatshop conditions.

International Labor Rights Fund Board President Ray Marshall, the former U.S. Secretary of Labor, in urging the Fund's board of directors to support the deal, urged sweatshop activists "not to let the perfect be the enemy of the good." The Fund reports that its board voted to support the deal by a narrow margin.

The Clinton White House established the Apparel Industry Partnership in 1995, following revelations that clothes in the Kathie Lee Gifford line were manufactured in sweatshops.

The Kathie Lee controversy elevated the growing public concern with sweatshops to a new level, and, says Trim Bissell of the Campaign for Labor Rights, manufacturers feared growing public discontent - and especially the prospect that concern about sweatshops might erode already weak public support for free trade.

The purpose of the Partnership was to bring together clothing and related industry manufacturers, labor unions and public interest groups to work out a consensus approach to addressing the sweatshop issue.

For now, at least, while Partnership has arrived at an agreement, it has not achieved a consensus.

- Robert Weissman

Arbitrary in Alabama

In 1995, a part-time actuary for the Alabama Insurance Department achieved what, for 15 years, the tobacco, insurance, pharmaceutical, chemical, oil and auto companies have been trying to accomplish in Congress and state legislatures around the country.

With the simple stroke of a pen, Alabama became the first state in the nation to approve mandatory binding arbitration clauses for insurance policies in the state, abolishing policyholders' rights to a civil jury trial.

Plaintiffs' lawyers immediately challenged the decision on state and federal constitutional grounds.

But if the challenges do not succeed, Alabama citizens face extinction of their rights to go to court against insurance companies or insurance agents for payment of their claims - even if the agent stole the policyholder's money.

Some fear that the Alabama rule has set in motion a process that could virtually eliminate the U.S. public's right to sue and hold accountable corporations that cause injuries.

Under mandatory binding arbitration, access to the courthouse door is blocked.

Disputes must be resolved by arbitrators. Arbitrators are not required to have any legal training, and they may be biased, or even under contract with an insurance company. The civil justice system's discovery process, whereby parties obtain information from one another, is extremely limited. The courts' rules of evidence do not apply. Arbitrators issue no written legal opinions, so no legal precedent or rules for future conduct can be established.

Costs must generally be split between the injured victim and the insurance company. These include arbitrator's fees, which can range between $200 and thousands of dollars per hour.

In Alabama, a policyholder who loses arbitration must pay all arbitration costs. And there is no right to appeal.

An Arbitration Bind

It is the binding nature of Alabama's arbitration that led former Alabama Insurance Commissioner Mickey DeBellis to speak out.

After 25 years with the Alabama insurance department, having been appointed commissioner by both Governor Fob James and former Governor George Wallace, DeBellis resigned in January 1998, he says, "mainly because of the arbitration issue."

"Everybody's entitled to their day in court, and binding arbitration takes that day away from you," says DeBellis. "I did not feel it was in the best interest of the consumers in this state."

Adding to DeBellis's anger was the fact that approval for these clauses took place in secret, with no public notice, in fact, without notice even to him - the insurance commissioner.

"Nobody said anything about it, nobody knew anything about it," he says.

Finally, sometime in mid-1997, he received in the mail a copy of a life insurance policy with an approved arbitration clause. "It was," he says, "one of the worst I'd ever seen in my life. It took every right away from the policyholder. I blew my top."

DeBellis immediately placed a moratorium on approval of mandatory binding arbitration clauses, but was quickly overruled by his boss, Governor James.

"I'm sure there was pressure put on him by insurance companies," says DeBellis.

Governor James instructed DeBellis to start approving these clauses, while issuing arbitration guidelines for insurers.

Current guidelines require agents to disclose arbitration mandates to prospective policyholders during the application stage.

"Part of our guidelines are a separate signed disclosure at the time of sale, that the policy they're purchasing or applying for is going to contain a mandatory arbitration clause," says Michael Bownes, current general counsel of the Alabama Insurance Department. "They sign a separate piece of paper that contains a description of what arbitration is, and that they fully understand the rights that they are giving up."

But DeBellis believes that is not enough. "The average consumer does not understand their insurance policy. You sign anything that's put in front of you. You have faith in your agent," he says.

Guidelines he had proposed required that disclosure take place not just during the application phase. In addition, he says policyholders should be required to sign a separate endorsement, to be attached to the policy, "where a person knows he's signing binding arbitration, rather than just signing an application."

He also wanted an arbitrator to have the same right as a judge to set punitive damages when an agent has defrauded a policyholder. But, he says, "They took that out. So a company can do anything they want to and you cannot punish them under binding arbitration. Whatever the agent does, whether he misleads you, lies to you, it goes to binding arbitration. I saw that I could not operate under those conditions."

Callous Companies

The Alabama law firm of Beasley, Wilson, Allen, Crow & Methvin is challenging the state's mandatory binding arbitration rule on constitutional grounds. Like most states, Alabama has a strong state constitutional right to trial by jury in civil cases. There are also similar guarantees in the Seventh Amendment to the U.S. Constitution.

That right is waived too easily under Alabama's law, the Beasley suit contends.

"People who can't read or write arc being bound by these things," notes lead attorney Jere Beasley.

Support for Beasley's position has come from a wide assortment of organizations and individuals, including Mothers Against Drunk Driving (MADD), Alabama Victims of (,time and Leniency, the Alabama Education Association, the AFL-CIO and Democrats for Christian Values.

Christopher Reeve, who has been paralyzed since May 1995 after falling from a horse in a riding accident, filed an amicus brief in support of Beasley's case.

"One of the hardest things I have had to do since my disability is to deal with insurance companies," Reeve said in his pleading. "I found them to be callous and to try to set up any roadblocks they can to keep from paying legitimate claims. I am totally against binding, mandatory arbitration in insurance policies."

The Arbitration Spread

What may happen if Beasley loses nd the Alabama arbitration policy is upheld is anyone's guess. Bownes of the Alabama Insurance Department does not expect many companies to adopt mandatory binding arbitration. "There are some companies that don't like arbitration because they may end up generating higher costs. Whereas a $500 or $1,500 claim might not go to litigation, it's going to go to arbitration," he says.

Currently, Bownes believes, "only 12 percent of 1,500 insurance companies licensed to do business in the state now have approved mandatory binding arbitration clauses," although he has no idea how many policyholders that represents, and sonic insurers may be waiting to see the Outcome of the litigation.

On the other hand, many believe that insurance companies do not like to go before juries. Arbitration is a system they can more carefully control. In general, arbitration leads to smaller awards against insurance companies. A spokesman for Beasley's firm says if they lose, "our feeling is this would fully blossom to other policies" besides life insurance, where most of the mandatory arbitration clauses have appeared so far.

Former insurance commissioners DeBellis says his legal division told him, "the policyholder's going to get screwed in-binding arbitration. Oh, if I was a company, I'd want it in there. Jere Beasley , he's put the fear of god in these companies' heart."

One more factor may influence the future of mandatory binding arbitration in Alabama. In November 1998, a new Democratic governor, Don Siegelman, was elected to office. Attorney Beasley says, "With a new governor elected, hopefully a new Insurance commissioner will revoke the rule." All it takes, he says, "is the stroke of a pen, just like it came into being."

- Joanne Duroshow


The November 1998 Lawrence Summers Memorial Award* goes to Royal Crown Corporation and the National Soft Drink Association, for mottos and mission statements suggesting soda has played a central role in the American struggle for freedom.

On the side of Royal Crown soda bottles appears: "Freedom ... To choose the best-tasting cola. That's what Royal Crown has stood for ever since it was first created in Columbus, Georgia back in 1905. The freedom to decide who you are and what you drink. There's nothing more American than that. So, be free. Drink R.C."

On its web site, the National Soft Drink Association proclaims, "Few products are as closely associated with American ingenuity, enterprise and culture as soft drinks. The industry not only share in, but was part of, the industrial revolution. Soft drinks helped maintain the country's morale during the Depression and spread American spirit among the troops during war time. ... Soft drinks bring people together and provide the quilt of American diversity with a common ground on which to meet, enjoy and agree. By any measure, soft drinks are one of the important elements that bind American enterprise and culture into a system envied the world over. Soft drinks are a good part of America."

*In a 1991 internal memorandum, then-World Bank economist and current Deputy Secretary of Treasury Lawrence Summers argued for the transfer of waste and dirty industries from industrialized to developing countries. "Just between you and me, shouldn't the World Bank be encouraging more migration of the dirty industries to the LDCs (lesser developed countries)?" Summers wrote. "I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that. ... I've always thought that underpopulated countries in Africa are vastly under polluted; their air quality is vastly inefficiently low [sic] compared to Los Angeles or Mexico City." Summers later said the memo was meant to be ironic.



Mailing List


Editor's Blog

Archived Issues

Donate Online


Send Letter to the Editor

Writers' Guidelines