From Gibson Guitars to Michigan Soda Bottles: The Troubling Trend of "Criminalizing Capitalism"
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You might have missed last Friday’s compelling editorial in the Wall Street Journal by Henry Juszkiewicz, CEO of Gibson Guitar Corp., regarding the company’s ongoing legal woes stemming from a draconian federal enforcement of the Lacey Act. The Lacey Act, as Juskiewicz explains, was “originally enacted as a means to curb the poaching of endangered” wildlife and plants by making it a U.S. crime to violate foreign poaching laws.
Deterring poaching is a noble objective, but the road to a bad economy is often paved with regulators’ best intentions. As described in the editorial, overzealous regulators and overly-broad interpretations of the law have resulted in the criminalization of run-of-the-mill business conduct – in this case, the federal government raided Gibson and seized fingerboard guitar wood the company imported from India, even though the Indian government certified that the wood imports were legal under Indian law. The U.S. Fish & Wildlife Service apparently decided it understood Indian law better than the Indian government, and adopted its own interpretation of Indian law.
Based on Gibson’s firsthand experience with overzealous regulators using the heavy hand of criminal law to pursue their objectives, Juskiewicz offers some timely and cogent thoughts on the troubling trend of regulators criminalizing capitalism:
This is an overreach of government authority and indicative of the kinds of burdens the federal government routinely imposes on growing businesses. It also highlights a dangerous trend: an attempt to punish even paperwork errors with criminal charges and to regulate business activities through criminal law. Policy wonks call this "overcriminalization." I call it a job killer.
It’s not just federal regulators who are criminalizing garden-variety business conduct in order to advance regulatory objectives; it’s happening at the state and local level, too. To give you just one example, last Friday, the U.S. Court of Appeals for the Sixth Circuit heard oral argument in a constitutional challenge brought by the American Beverage Association to a bizarre Michigan law that criminalizes the sale of Michigan-labeled beverage containers outside of Michigan (we’re still scratching our heads over this one – shouldn’t states want to encourage manufacturing in their state and exporting products outside the state?). The Chamber’s public policy law firm, the National Chamber Litigation Center, filed an amicus brief supporting the ABA’s challenge to the law.
The problem Michigan tried to solve with its new bottle bill is an old one, perhaps best memorialized by the Seinfeld episode “The Bottle Deposit” about Kramer and Newman’s failed scheme to travel to Michigan with bottles purchased in New York to take advantage of Michigan’s bottle refund (indeed, the state of Michigan cited the episode in its legal brief!). Certainly, no one objects to Michigan legislators protecting their fiscal budgets from fraudsters like Newman. But rather than go after the bottle deposit fraudsters themselves – the Newmans and the Kramers – Michigan chose a disturbing shortcut: why not make it a crime if Michigan-labeled beverage containers are sold out of state? Because of the Michigan law, if a Minnesota distributor is shut down due to a labor dispute, a Michigan beverage company would be committing a crime if it shipped its excess Michigan-labeled product to Minnesota to pick up the slack. And what’s worse, this is a strict liability crime: if a Michigan beverage company mistakenly sends a shipment of Michigan-labeled soda to Wisconsin, that’s a crime, too. That disorganized mess of paperwork in your “in box” could be a crime waiting to happen.
The knee-jerk reaction by some regulators to slap a criminal label on just about anything can have profound impacts on global commerce, the American economy, and ultimately, American workers. As Juszkiewicz explained, the more practical way to describe “overcriminalization” is “job-killing.” More from Juszkiewicz:
Policy makers must stop criminalizing capitalism. This begins by stopping the practice of creating new criminal offenses, or wielding obscure foreign laws, as a method of regulating businesses.
Especially in a bearish economy, entrepreneurs need to be able to operate without the fear that inadvertently breaking an obscure regulation or unknowingly violating a foreign statute could shut down their company and land them or their employees in jail.