Public Protests, Private Lawsuits, and the Market: The Investor Response to the McLibel Case

Abstract

The tendency of English libel law to protect reputation at the expense of freedom of expression makes the United Kingdom a potentially attractive forum for retaliatory lawsuits against individuals and organizations who lobby or campaign against the interests of large companies. The most prominent recent example of such a lawsuit was the so‐called ‘McLibel’ case, in which McDonald's Corporation sued protesters who had distributed anti‐McDonald's leaflets outside some of the company's restaurants. The case is often cited as evidence that the risk of unfavourable publicity generated by retaliatory libel actions is a strong deterrent to using the libel laws to silence public opposition to corporate activities. This article uses a technique widely employed in financial economics research, the ‘event study’ method, to investigate whether the unanticipated bad publicity attracted by the McLibel case had a negative financial impact on McDonald's, such that future retaliatory lawsuits might be deterred.