EDITION 9

WeeklySEpTEmbEr 21, 2012

Obama’s Case Against China: The U.S. Has a WTO Credibility Gap

Buy Me, Sell Me, Sue Me

Jack Bonner: On Defeating Food Labeling Lawsuits

Don’t Get Lost in transLation: 3 ruLes for effective Hispanic & Latino outreacH

richard S. Levick, Esq.Originally Published on Fastcompany.com

3 ruLes for effective Hispanic & Latino outreacH

Don’t Get Lost in transLation:

With more than $1 trillion in annual spend-

ing power and projected growth of 48 per-

cent over the next three years, Hispanics

and Latinos do not represent a market seg-

ment; they are a market unto themselves.

As such, marketing and communications

outreach to this ever-expanding American

population isn’t a homogeneous, one-size-

fits-all proposition. Rather, it is a far more

targeted exercise that demands a true

understanding of the subtle nuances that

define myriad Hispanic and Latino commu-

nities in the U.S.

The Hispanic and Latino diaspora extends

across all geographies, generations, and

income demographics. There are Mexican,

Cuban, Dominican, and a host of other heri-

tages, all with distinct cultures, histories, and

even languages. There are first, second, third,

and fourth generation Americans, all of whom

demonstrate varying levels of assimilation.

Hispanics and Latinos live in urban, subur-

ban, and rural settings. Some measure their

incomes in tens of thousands of dollars a year.

Others make tens of millions.

Such diversity is the foremost challenges for

corporate marketers and communicators seek-

ing to tap into the Hispanic and Latino market.

Too often, companies fail to understand that

messages designed to reach the entire popula-

tion are too broad to tangibly resonate with

anyone in it. As with all advertising and public

relations endeavors, you have to know who

your audience is before you can paint fine

enough strokes to connect on a personal level.

In the Hispanic and Latino context, that means

knowing where your audience is from, where

it is going, and how it is likely to interact with

your unique corporate identity.

Weekly

1. it aLL starts witH GeoGrapHy.Jose Nino, President of the El Nino Group, Co-

Chairman of the Hispanic Alliance for Prosper-

ity Institute, and former President of the United

States Hispanic Chamber of Commerce, believes

that effective Hispanic and Latino outreach

begins with careful considerations about the

region in which companies are communicating.

“If you’re operating in the southwest, you’ll be

talking predominantly to people with Mexican

heritage,” says Mr. Nino. “In the southeast, the

population hails largely from Cuba and other

Caribbean nations. In New York City, you’ll find

a number of people of Puerto Rican and Do-

minican descent. There are, of course, excep-

tions in every city and state—but if you know

the basics of the Hispanic and Latino diaspora,

you already know a great deal about how best

to target your efforts.”

Mr. Nino says that’s because country of ori-

gin impacts everything from cultural consid-

erations to language. “A Spanish word that

means one thing in Mexico can mean some-

thing completely different to someone who

speaks an El Salvadorian dialect, and some-

thing else again to people whose families came

from Venezuela or another South American

country,” says Mr. Nino. “From the clothes

they wear to the foods they eat, there is just as

much diversity among these communities as

there is across the entire United States. That’s

why blanket marketing and communications

initiatives simply don’t work as well as they

could if companies really took the time to un-

derstand who they are talking to.”

Mr. Nino sees even more value in drilling down

beyond the region-by-region level. “If you have

the resources to look at these communities on a

neighborhood-by-neighborhood basis, you can

learn even more about wealth, assimilation,

and the other factors that influence buying

decisions. From there, you have all you need to

craft messages that really hit home.”

2. take tHe time to forGe LastinG reLationsHips.Raymond Arroyo, the Head of Alternative

Distribution at Aetna and a Member of the

Board of Directors at the United States Hispan-

ic Chamber of Commerce, sees patience as a

key factor that drives successful Hispanic and

Latino outreach. In working to close the health

insurance coverage gap among Hispanics and

Latinos, he has found that results don’t often

materialize overnight. “Hispanic and Latino

consumers want to take the time to learn

what you’re about before they buy,” says Mr.

Arroyo. “It’s a slower, more personal process

than what is traditionally used to market to

other audiences. These communities want to

know just as much about you as the products

and services you provide. That takes time –

and, as a result, too many companies abandon

efforts that might be working just because

goals aren’t reached as quickly as they might

have hoped.”

Tony Jimenez, President and CEO of MicroTech,

the fastest-growing Hispanic-owned business

in the United States, sees business-to-business

partnerships as an effective way to build the re-

lationships that Mr. Arroyo strives for. “We’ve

seen a lot of state and local governments put

an emphasis on working with companies that

contract work out to Hispanic and Latino-

owned firms,” says Mr. Jimenez. “The same is

true of the average Hispanic or Latino con-

sumer. When a company markets to us, it feels

good to know there’s a clear recognition of the

important role we play in American society.

But when a company is willing to work with us,

there’s an even more powerful message about

trust and investment in the Hispanic and La-

tino communities that goes a long way toward

crossing the cultural divides that may exist.”

3. Don’t forGet DiGitaL.According to recent reports, young Hispanic

and Latino Americans have spent $17.6 billion

on mobile devices and more than $500 million

on mobile applications thus far in 2012. That

fact alone tells us that any Hispanic and Latino

outreach strategy that deemphasizes the social

and digital media landscape (as many mistak-

enly do) isn’t built for an audience that is as

tech savvy as any we’ve seen.

Consider that the geo-targeting needs outlined

in point one are perfectly suited for a world in

which effective Search Engine Optimization

(SEO) and Marketing (SEM) can enable organi-

zations to tailor diverse messages to the re-

gions, states, cities, and neighborhoods where

they will have the greatest impact. At the same

time, consider that social media engagement

provides an ideal avenue for building the

personal relationships outlined in point two.

When companies utilize blogs, Facebook, Twit-

ter, and other platforms to talk not just about

their products and services, but the ways in

which those products and services empower

and enrich consumers’ lives, they nurture the

trust and familiarity so important to Hispanic

and Latino consumers.

speaking the Language

By understanding the diversity that defines

Hispanic and Latino communities, focusing

the time and effort that it takes to build lasting

brand relationships, and optimizing social

and digital media engagement, companies

can reach the fastest growing market in the

U.S. with the precision and specificity needed

to succeed.

In this context, speaking the language is about

a lot more than words. It’s about living a

culture and focusing on the details that are all-

too-often lost in translation.

Richard S. Levick, Esq., President and CEO of LEVICK,

represents countries and companies in the highest-stakes

global communications matters—from the Wall Street

crisis and the Gulf oil spill to Guantanamo Bay and the

Catholic Church.

L

richard S. Levick, Esq.Originally Published on Forbes.com

tHe u.s. Has a wto creDibiLity Gap

obama’s case aGainst cHina:

Weekly

But why should it play by the rules? We don’t,

at least not in this case.

A compromised WTO is only one consequence

of our non-compliance. Equally portentous, the

WTO could itself approve violations of U.S. in-

tellectual property as fair retaliation for unfair

trade practices. In 2010, for example, the U.S.

settled a dispute with Brazil over American

subsidies to cotton growers, one day before

Brazil was to begin sanctions—with WTO

authorization—totaling $830 million. The sanc-

tions included tariffs on such items as autos,

pharmaceuticals, medical equipment, electron-

ics, textiles, and wheat.

Brazil would also have been the first country to

infringe American intellectual property rights

with the WTO’s blessings. Brazilian farmers

would have no longer been charged fees for

seeds developed by American biotech compa-

nies. American pharmaceutical patents would

have been directly violated prior to expiration.

The prospective costs to U.S. businesses were

estimated at $239 million.

The United States blinked then—and it better

blink now in its dispute with Antigua, or risk

providing its global competitors with a pow-

erful excuse for why they too can ignore the

rules or simply stonewall when called to task

for doing so.

The Chinese have two good reasons to scoff

dismissively at the Obama administration’s

trade case, filed yesterday at the World Trade

Organization, which accuses them of unfairly

subsidizing auto and auto parts exports.

The case specifically targets $1 billion in subsi-

dies during 2009-2011, mainly of exports to de-

veloping countries where the automobiles are

assembled and purportedly compete with cars

manufactured stateside. The U.S. is also about

to take further legal action in an ongoing WTO

case against China that involves anti-dumping

duties levied last year against American car

exports to China. China has filed its own

counter-complaint with the WTO over anti-

dumping duties that Washington had levied on

$7 billion-plus in various Chinese goods.)

The first reason for the Chinese to balk is fairly

obvious. President Obama is announcing the ini-

tiative amid the heat of the election and he’s do-

ing so in battleground Ohio. It’s a fair guess the

Chinese will try to derail his initiatives by high-

lighting the blatantly ulterior motives at play.

The second reason is even more important be-

cause it potentially compromises any case the

U.S. might bring before the WTO. It involves

an ongoing dispute, dating back to the early

part of this century, between the government

of Antigua and Barbuda (“Antigua”) and the

government of the United States. At issue is the

total prohibition by the U.S. of cross-border

gambling services provided via the Internet.

Antigua has challenged that prohibition.

It seems a relatively narrow issue but there’s a

catch: the WTO ruled on the matter and came

heavily down on the side of Antigua, which is

the smallest WTO member to have ever op-

posed, much less prevailed against, the organi-

zation’s largest member in such a proceeding.

So far, however, the U.S. has simply not com-

plied with the ruling. We have neither lifted

the restrictions nor satisfied a damages penalty

that continues to mount annually. It is levied

each year the U.S. fails to pay up in full.

Typically, the United States takes a pretty

high-minded approach to compliance with

global regimens of all sorts, from WTO rulings

to anti-corruption initiatives. We have aggres-

sively sought a leadership role and more or less

achieved it. Caesar’s wife must now be beyond

reproach. The consequences of hypocrisy are

unacceptable, while only one instance of non-

compliance is needed to expose such hypocrisy.

Never mind a blatantly political instance like

the current Obama case over auto and supply

subsidies. Imagine you’re the People’s Bank

of China, which has taken a number of steps

since 2001 that discriminate against foreign

suppliers of electronic payment systems. On

September 1, a WTO Panel Report found in

favor of a case brought by the U.S. “This deci-

sion makes it clear that China should honor

its WTO commitments to play by the rules and

stop discriminating against American financial

services providers,” said U.S. Trade Represen-

tative Ron Kirk.

Weekly

The Antigua matter is especially intriguing

because it also raises a number of related ques-

tions about how global business is trending in

the Internet Age. In March 2003, Antigua took

its case to the WTO after several months trying

to engage the U.S. in meaningful negotiations.

A year later, the Dispute Panel Report found

that the restrictions against online gambling

violated the General Agreement on Trade in

Services (GATS) treaty. The ruling caused

quite a stir in the gaming industry as it pre-

saged a new era of unambiguously legalized

online gambling.

The American position was that our federal law

simply prohibits all betting and gambling ser-

vices provided by non-U.S. interests. So in 2005,

the WTO heard and ruled on an appeal, finding

that: (1) free trade in gambling was indeed one

of the commitments we made to GATS; (2) that

we had adopted “measures”—including the

1961 Interstate Wire Act prohibiting the use of

wire communication facilities to convey bets—

that interfere with that commitment; and that

(3) we could not rely on a “moral defense,” i.e.,

that gambling is immoral and the public needs

to be protected from it.

The WTO explained that any moral defense in

this case was obviated by, for one, the inter-

state online horse race betting that is today

altogether legal. The WTO gave the U.S. eleven

months to either allow Antigua to provide

online gambling or prohibit domestic online

horse betting. So much for morality!

For the U.S., the WTO decision requires a re-

haul of the Wire Act so that it is compatible

with our GATS commitment and, in a broader

sense, adjusted to the realities of the digital age

in a global economy. But the initial response

from the U.S. Trade Office was that it would

not ask Congress to weaken restrictions. Then

came the penalties. In 2007, the WTO awarded

Antigua $21 million in annual damages. The

tab has now accumulated to over $120 million.

Throughout, the Antiguans have seemed most

reasonable. This August, their government ap-

proached the WTO, seeking a compromise on

the damages issue even as it assembled a team

to come up with further solutions for consid-

eration by both the U.S. and WTO. Meanwhile,

the interminable American foot-dragging only

encourages others in the world to disregard

any pressure we might try to impose on how

they should “play by the rules.”

There are numerous lessons in this saga for

American lawmakers. First, they need to real-

ize what their constituents think. A 2006 Zogby

poll commissioned by Antigua found that over

70% of Americans do not want the government

to stop online betting.

Lawmakers and enforcers should also view

the Wire Act in context. In light of all the com-

plex legal issues that Internet commerce has

raised in the past two decades, isn’t it reason-

able that a 1961 law governing wire communi-

cations ought to be revisited under any cir-

cumstances? Bear in mind too the intent of the

Wire Act, which then-Attorney General Robert

Kennedy saw mainly as a weapon against

organized crime.

The good news is that the DOJ has already

showed some flexibility; notably, it reversed

its position last year by exempting lotteries

from Wire Act enforcement. Perhaps the tide

is slowly turning in favor of Antigua. Yet this

story is not just about gaming, nor is it just

about Antigua. It is also about our own legal

and competitive preparedness for the digital

age, and how that preparedness affects our

credibility in the global marketplace.

After all, it would be a shame to see American

companies lose millions in intellectual prop-

erty because of our insistence that a 1961 law

must govern technologies that were unimag-

ined when the law was written. Innovation

and leadership are inseparable. If our policies,

legal and otherwise, do not evolve in tandem

with marketplace realities, we will inevitably

fail our own standards at every level.

There are people throughout the world who

are just salivating to see that happen.

Richard S. Levick, Esq., President and CEO of LEVICK,

represents countries and companies in the highest-stakes

global communications matters—from the Wall Street

crisis and the Gulf oil spill to Guantanamo Bay and the

Catholic Church.

L

“ The WTO explained that any moral defense in this case was obviated by, for one, the interstate online horse race betting that is today altogether legal. The WTO gave the U.S. eleven months to either allow Antigua to provide online gambling or prohibit domestic online horse betting. So much for morality!”

buy me, seLL me, sue me

richard S. Levick, Esq.Originally Published on Forbes.com

At 7:16 a.m. EDT on April 2, Reuters report-

ed an unsolicited offer by Coty Inc. to pur-

chase cosmetics legend Avon Products. At

8:04 a.m., Avon formally rejected the offer—

a smart move, according to some observers,

in light of the purportedly low-ball offer.

The specific timing here is interesting and

important because of what happened im-

mediately afterward. At 10:18 a.m., the law

firm Harwood Feffer LLP announced it was

pondering a lawsuit against Avon’s board of

directors, based on concerns that Avon, by

rejecting the $10 billion, $23.50 per share offer

out of hand, failed to meet its fiduciary duties

to shareholders. At 12:18 p.m., the firm Brower

Piven announced it too was investigating Avon

for the same reason.

There’d been no time to come up for air. A

scant five hours after a proposed merger was

first publicly announced, and four hours after

it was rejected, not one but two potential

lawsuits were already in the works. Those who

understand the power of instantaneously viral

communications to incite litigation might won-

der what took them so long.

Weekly

So pervasive have such lawsuits become that

some observers have taken to calling litigation

a de facto “deal tax,” simply a cost of doing

business. Studies by Cornerstone Research

show that the incidence of lawsuits in deals

valued at more than $500 million jumped to

96% in 2011, up from just over 50% in 2007. In

other words, there’s now almost an absolute

certainty that, if you do the deal, you get sued.

Just as startling is the rise in the average num-

ber of lawsuits per deal, which more than dou-

bled to 6.1. Cornerstone found 11 transactions

in 2011 beset by at least 15 lawsuits apiece.

We’re talking about a phenomenon that

doesn’t only involve how bankers craft the

deals or lawyers dot the i’s. Nor are we just

necessarily talking about corporate fire sales

under generally distressed circumstances.

Even the best positioned deals involving the

healthiest companies must inevitably run a

contentious legal obstacle course. Google’s

announcement in August 2011 that it planned

to purchase Motorola Mobility resulted in

no fewer than 16 lawsuits even though the

$12.5 billion, $40 per share offer was widely

praised throughout the mobile communica-

tions industry as a good fit for all concerned.

As the legal press recently reported, Exxon-

Mobil is likewise a very good example of a

company that does “everything we can up

front to make sure the buyer knows exactly

what they are buying.” Yet the most com-

mendable of such efforts won’t plug all the

holes either. In February, for example, a Texas

court ruled against Exxon, awarding 21 plain-

tiffs’ law firms $8.8 million in fees for their

work on shareholder lawsuits related to the

2010 acquisition of XTO Energy Inc. It was a

good payday for the lawyers if not their clients

as shareholders won important new disclosure

guarantees but no money.

By contrast, Del Monte shareholders recently

got $89.4 million to settle a class action suit

prompted by conflict of interest allegations

against the company and Barclays Capital in

the sale of Del Monte to a group led by KKR.

But the Exxon scenario is really the norm, ac-

cording to the Cornerstone data, as outcomes

more often involve governance changes than

pecuniary awards. “Interestingly,” the study

comments, “…we have not encountered a case

in which shareholders rejected the deal after

the additional disclosures were provided.”

Not one case! Thereby hangs an instructive les-

son about the kind of communications that may

still effectively deter litigation, at least sharehold-

er suits. (Lawsuits between buyers and sellers,

with different sets of problems, are also on the

rise.) Lawyers like Stuart Grant of Grant & Eisen-

hofer, who represented the investors in the Del

Monte case, say that litigation ensures fairness to

the shareholders, especially in a market where,

absent antitrust concerns, the regulators don’t

scrutinize the deals all that closely.

Yet it also stands to reason that if, in lieu of

cash, disclosures imposed after cases are

brought suffice to placate claimants, why not

Weekly

Jack Bonner, President of A2W—Advocacy to Win, discusses the recent deluge of food labeling

lawsuits and outlines what companies in the crosshairs can do to protect their brands, reputa-

tions, and bottom lines. With adversaries making an aggressive case in the Court of Public Opin-

ion, both offensive and defensive strategies are needed to assuage consumer concern and con-

vince an increasingly wary public that they can believe what they read in the grocery store aisles.

crisis

LitiGationfinanciaL communications

corporate & reputationpubLic affairs

siGn up toDay

Jack bonneron DefeatinG fooD LabeLinG Lawsuits

assure those disclosures in the first instance

and cut out the expensive middle men, i.e., the

lawyers who file the now-inevitable lawsuits?

To explain why there’s been this uptick in litiga-

tion, we probably need look no further than the

Internet and the social media. How else explain

the precipitous rise in case volume compared

to past markets when M&A transactions pro-

liferated even more abundantly but activist

shareholders and high-volume class actions did

not? Human beings have not changed since the

1980s but their tools have.

In addition to the shareholders themselves, in-

fluencers with both interested and disinterest-

ed motives to challenge deals range from busi-

ness journalists to investment bankers looking

to build a reputation as consultants. They often

deploy a combination of old and new media.

The opening salvo might be a column in a

respected print publication or an appearance

on a cable business news network. The fire gets

lit and the stage is thus set for a social media

conflagration.

If the problem starts online, solutions can be

found there as well. Not just the substance of

the messages whizzing around the Internet, the

Cornerstone research powerfully underscores

the importance of timeliness as approximately

two-thirds of M&A-related lawsuits are filed

within two weeks of the announcement. What’s

demanded is as much transparency as possible

as fast as possible.

One envisions a situation, perhaps not un-

like the Exxon-XTO Energy case, in which the

grievances that lead to a lawsuit are fully aired

on a social media channel, perhaps an activist

site, that allows shareholders to vent any and

all such grievances. Recent signs point toward

a prudently self-interested participation by

public companies—Johnson & Johnson was a

pioneer here on the now-defunct Moxy Vote

—in such discussions on the very sites where

they’re happening. By going to the same sites

their potential adversaries go, they won’t elimi-

nate litigation but they will take a meaningful

step in that direction.

It’s called getting down into the trenches. From

a cost/benefit perspective, that sure beats show-

ing up at court.

Richard S. Levick, Esq., President and CEO of LEVICK,

represents countries and companies in the highest-stakes

global communications matters—from the Wall Street

crisis and the Gulf oil spill to Guantanamo Bay and the

Catholic Church.

L

“ …we have not encountered a case in which shareholders rejected the deal after the additional disclosures were provided.”

tHe urGencyof now.