Blogs, Business & the Law

It appears that the Security and Exchange Commission (SEC) is going to look, at least informally for now, at the blogs of John Mackey, CEO of Whole Foods. It appears that he posted rather unflattering opinions using a pseudonym of a major competitor, Wild Oats, which his company is now trying to buy.

While CEO's blogging and bad mouthing competitors is not unheard of, what is getting SEC attentions is that Mackey's musings might be interpreted as a means to drive down Wild Oats stock before an acquisition bid. Mackey also appeared to disclose company sensitive financial information in his blog. The question is whether there was "intent" to damage Wild Oats or "intent" to disclose information that could be interpreted as inside information.

Corporate lawyers are divided about whether SEC law was broken (no surprise there), the Wall Street Journal is saying (subscription required) that the whole thing is a tempest in the teapot, and others are claiming that Mackey was just exercising his free speech rights (also no surprise).

My own view, be it as it may, is that the SEC will likely warn Mackey not to make statements about his company under a pseudonym; Whole Foods will suffer a bit in its reputation and stock price for a short while because of the flap; Mackey will be warned by his board to shut up in the future; and the next CEO who does something similar is going to find the SEC hanging him or her out to dry. The free speech angle will need a court to decide.

The point is, that IS&T continues to create new situations and new risks that are hard to predict a priori. If Mackey had done what he had done using old paper and pen, I don't think there would be an argument over his intent - the idea of what blogging actually is about clouds intent. Is blogging just a person's "musings" or "opinions" that legally mean very little, if anything?

This area is very gray, and is getting legally tested all the time in regard to blogs and libel, for example. The law has always lagged technology. This case is no different. All we can do is sit back, watch the fun and blog about it.

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