Growing Conflict

Bauer Researcher Looks at Conflicting Policies and Effect on Business

Published on April 21, 2020

Photo: Bauer Researcher Looks at Conflicting Policies and Effect on Business

The Trump administration’s rollback of automobile emission standards highlights a growing problem for businesses caught between conflicting municipal, state and federal laws.

California and several other states have issued their own, more restrictive auto emission standards, creating a patchwork of regulations and spawning litigation but, so far, offering no clear path for car manufacturers and related industries and suppliers.

It’s one of many examples of conflicting U.S. laws, and there is no indication the phenomenon is going away any time soon, said Betsy Gelb, Marvin Hurley Professor of Marketing & Entrepreneurship at the C. T. Bauer College of Business.

Gelb and two colleagues wrote “Stigmatized Products: How Conflicting Laws Can Influence Decisions to Proceed,” published in the Journal of Business Strategy in February.

In the paper, they shed light on a growing number of non-uniform laws that ultimately create additional expenses (and headaches) for businesses, which increases the price consumers pay.

Many concern “stigmatized products,” such as marijuana, plastic grocery bags, genetically modified foods and even Pit Bull Terriers. Products are considered stigmatized when a significant number of consumers hold negative views toward them, Gelb said.

Conflicting laws that ban something in one place, but not another, create a layer of complexity for business owners, especially if business strategists are considering mergers and acquisitions, or banking and finance decisions that incorporate stigmatized products, Gelb said.

Medical marijuana dealers in some states have been denied legal representation, for instance. Banks and other financial institutions are typically unlikely to offer loans to them for fear of losing federal insurance. Lobbying for standardizing laws in a divided political atmosphere can be futile, time-consuming and expensive.  Creating different products or packaging to accommodate the laws in different places increase costs, which are passed along to consumers.

“These companies have got infinite problems, in terms of legally they can’t trademark a name, or use a bank, or get legal representation,” Gelb said. “It’s certainly going to give marketers a problem and it ultimately gives consumers a problem.”

The Business Strategy paper provides a background in product-related laws that are inconsistent across U.S. jurisdictions, then identifies examples of the many stigmatized products that, because of their unpopularity among some segments of society, face non-uniform legal environments.

Two foreseeable possibilities exist going forward, Gelb and two co-authors write. Congress or regulatory agencies will attempt to create federal uniformity, overriding state laws either with a nationwide ban or nationwide relaxing of restrictive state rules, as in the case of emission standards. Or, the federal government might encourage states to chart their own course in controversial areas, but then consider federal preemption of contrasting legal solutions.

“An increasing number of firms who now face simply jurisdictional inconsistency, may soon face the greater problem of operating in an environment where they simply cannot conform to laws that conflict,” the researchers write.

One tactic worth considering is mobilizing consumer sentiment.

“Organizations that market stigmatized products appear to have a vital interest in awakening consumers to the costs associated with contradictory laws. This fact suggests the merits of increasing such awareness, including awareness of the trade-offs involved. As costs increase for marketers, they are paid by buyers. Consequently, consumers/voters have a legitimate interest in protecting and promoting the uniformity of regulation that companies presumably favor – whether for products as ordinary as plastic bags or as specialized as marijuana.”