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

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.