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The Increasing Legal Costs all Major Blue Chips Face

Legal Costs Blue Chips

At any given time, every single blue chip company in the world is embroiled in a number of legal disputes, ranging from taxation issues to working conditions, pension problems and more. This is testament to the litigious society in which we live, as opposed to any maliciousness on behalf of these big companies (most of the time anyway). After all, actors, businessmen, sports stars and even writers find themselves involved with similar struggles on a day-to-day basis.

To the average person, a lawsuit is only worth pursuing if there is potential for a big payday at the end of the struggle. The average man and woman on the street can’t afford to rack-up legal bills in order to defend their reputation against libel and slander, or even to counter legal claims made by others. But to these companies it’s just another part of day-to-day operations.

There are a few cases that appear more than others though, ones that seem to have been costing the world’s biggest companies for years and will likely continue to do so for many more years to come.

Big Banks in Big Trouble

Over the last couple decades, the biggest banks on the FTSE 100 (the major index on the London Stock Exchange) have been paying out an astronomical amount in legal fees, essentially covering for their mistakes and trying to stay in the government’s good books. Of all of the legal costs accrued by the 100 blue chip companies in this index, half are paid out by the banks, which number fewer than half a dozen.

In total, these banks are setting aside more than £30 billion (about $40 billion) every single year, covering everything from LIBOR and FOREX manipulation disputes to PPI misselling. This combined total is more than the total annual revenue of Barclays, TSB and Standard Chartered put together, two of which are included in that $40 billion figure mentioned above.

False Advertising

In recent years Volkswagen have been tied up in an emissions scandal that will likely cost them tens of billions, money they will still be paying for years to come. When you factor in the loss of business and the general damage they have caused to the public’s perception of diesel cars, their total loss will actually be much higher. The VW Group have a revenue of close to $250 billion, so there is a lot to lose, but a small fraction of that is profit and they will be seeing a lot less of that for years to come.

At its heart, the emissions scandal was basically false advertising, albeit to a much more fraudulent extent (they were passing off their cars as being more environmentally friendly than they were, knowing it would drive up sales and drive down taxes). This is something that has caught many big companies out and VW are by no means the only ones suffering.

Danone were once fined close to $50 million for making a claim on their Activia yoghurts that something was “scientifically proven” when there was no such evidence baking it up. In the 1990s, Airborne were also hit with a substantial fine for claims that they made, while multi-million dollar false-advertising fines have also been paid by everyone from Extenze to Kellogg.

And believe it or not, even Red Bull were sued for claiming that their drink could “give you wings”.

The Mistakes of the Past Cause the Health Problems of the Future

Imagine for a minute that you run a manufacturing business and someone approaches you with a material that can essentially guard against fire and electrical issues, providing insulation and absorb sound, all for a rock bottom price. And not only is this a miraculous material, but there are no major health warnings and it has been mined by humans for 4,000 years.

You would probably take them up on the offer, right? Well, millions did. The problem is, that material was asbestos and as we all now know, it is highly dangerous and has since led to countless health problems for the workers that were exposed to it.

Asbestos is no longer widely used, but the conditions it caused are still prevalent, so much so that there are law firms setup primarily to help clients with asbestos-related diseases. Companies that used it and exposed their employees to it are still paying the cost, as are governments the world over. And rightly so, because families and individuals have been paying with their lives and their health.

Asbestos is not the only incident where a commonly used product previously thought to be safe and groundbreaking has gone on to ruin lives and bring the companies that used it to their knees. Over $50 billion is said to have been paid out on asbestos lawsuits alone, and then you have the payouts associated with damaging drugs like Thalidomide and chemicals like Radium.

But what is perhaps most surprising in these cases is that the companies at fault for manufacturing and distributing, usually bounce back, a benefit that will never be bestowed on the millions that suffered because of them.

The German manufacturers of the Thalidomide drug, which caused horrible birth defects in countless Americans and Europeans, were sued repeatedly and even tried for manslaughter, and yet the company remains to this day. In fact, they are the ones responsible for creating the opioid Tramadol, which has created a few problems of its own.

In other words, the little guys can fight back and get a little justice, but nothing stops these multinational from marching on. Whether you see that as a good thing or a bad thing is entirely down to perspective.

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