A Multinational Happy To Do Business in Israel Is Labeled a Boycotter

Unilever Opposes Subsidiary Ben & Jerry’s Decision to Spurn the West Bank. It Doesn’t Matter Legally

In the wake of the decision by Ben & Jerry’s board of directors to boycott what it describes as “Occupied Palestinian Territory” and to refuse to renew its Israeli licensee’s franchise to distribute its ice cream once it expires at the end of next year unless the latter joins in the boycott, the Israeli government and the country’s supporters are insistent that someone pay a price in Ben & Jerry’s home base in the United States.

That price will be paid by Ben & Jerry’s parent company, Unilever.

While a counterboycott of Ben & Jerry’s is underway in America, especially among kosher outlets, the Israeli government is urging the governors of each of the 35 US states with anti-boycott, divestment and sanctions (BDS) laws and executive orders on its books to activate them as financial retribution.

The hammer will ultimately fall heaviest on Unilever, which has become an unwilling participant in the story. It begs the question of whether the anti-BDS laws were designed to punish entities that did not pick the fight and which do not appear to want any part of it.

I would suggest they take a deeper look at the agreement they have with Ben & Jerry’s. I think Unilever was simply caught off-guard by how quickly this all spiraled. They’re indicating that their hands are tied. But a parent company ultimately controls its subsidiary

“That’s tough for them. We didn’t choose to be on this battlefield, either,” Marc Stern, chief legal officer for the American Jewish Committee and a leading expert in legal advocacy on issues of concern to the Jewish community, told The Media Line.

“The bottom line is that, legally, Unilever is on the hook. They tried to cut the baby in half in this situation. They’re happy to take the profits, and want to absolve themselves of the baggage of the brand they bought. That won’t hold up in court,” said Stern.

Unilever, a multinational consumer goods behemoth headquartered in London and the largest soap seller in the world, owns the likes of Cornetto, Dove, Hellmann’s, Knorr, Lifebuoy, Lipton, Magnum, Marmite, Persil, TRESemmé and Vaseline, to name a few of its more than 400 brands.

Many Unilever products can be found on Israeli shelves, within the country’s internationally-recognized borders, as well as in the West Bank and east Jerusalem, in Jewish settlements and Palestinian Authority-controlled territories. Evidently, the company harbors no ill will toward Israel proper or its disputed settlements. So, what about the spirit, rather than the letter, of anti-BDS laws?

“A company is not a human being. A company doesn’t have feelings. It doesn’t have a personality. It doesn’t have thoughts. But, it does have legal obligations and responsibilities,” Eugene Kontorovich, a legal scholar specializing in constitutional and international law, told The Media Line. Kontorovich is a proponent of using anti-BDS laws to combat the BDS movement and has helped many US states draft such legislation.

When Unilever purchased Ben & Jerry’s back in 2000, in an unusual arrangement Ben & Jerry’s negotiated for itself the power to maintain an independent board of directors, responsible for “preserving and enhancing the company’s social mission and with safeguarding the essential integrity of the Ben & Jerry’s brand,” according to a Ben & Jerry’s statement.

The acquisition agreement essentially grants the Ben & Jerry’s board veto power over any Unilever decisions related to the company’s social mission and brand integrity. That apparently includes the approval of the content of marketing materials, licensing and other uses of the Ben & Jerry’s trademark.

“The original acquisition agreement had nothing to do with Israel or the Middle East. Ben & Jerry’s retained control of certain things primarily stemming from environmental and labor issues and other social justice causes they wanted to pursue. Unilever could not have foreseen the agreement would be leveraged in this way,” said Stern.

In the immediate fallout from Ben & Jerry’s announcement on Monday, Unilever attempted to distance itself from the controversy, releasing a statement saying: “We remain fully committed to our presence in Israel, where we have invested in our people, brands and business for several decades.”

The parent company wrote that it “also welcome[s] the fact that Ben & Jerry’s will stay in Israel.”

That last portion only stirred the pot, with the Ben & Jerry’s board calling it an unauthorized statement, and inferring that a complete withdrawal from the Israeli market was still possible, something that Unilever reportedly has gone to lengths to stop. The point is moot in Israel itself, where the country’s own laws bar a company from operating in sovereign Israel if it boycotts Israeli settlements, essentially meaning that Ben & Jerry’s distribution in any part of Israel is almost certainly coming to an end.

In addition, the CEO of Ben & Jerry’s Israeli licensee, Avi Zinger, says it will not boycott the settlements.

The larger question is whether Unilever will be allowed to market its other brands in Israel. The Israeli Foreign Ministry told The Media Line that its legal adviser, Tal Becker, was still in the process of formulating his legal opinion on the entire matter.

Meanwhile, many US states bar their agencies from contracting with any individual or company that boycotts Israel – and, in some cases, any area that Israel controls. There are generally restrictions. For instance, the contract must be for a designated minimum amount, or the boycott must affect the US state’s own market.

“If hummus is sold in the school dining room, for instance, you can’t boycott an Israeli brand of hummus in those states. In this situation, if there is a state park that sells Ben & Jerry’s at its concession stands, it will generally fall under the various anti-BDS laws, and the state would cut its business dealings,” said Stern.

Unilever did not respond to requests for information about its contracts with state agencies, but experts note that based on its large brand portfolio, its business with government entities is likely notable.

A second, smaller set of 12 states has laws that call for the state to divest its pension fund investments from any companies boycotting Israel. The definitions of “boycott” are fairly broad. Airbnb, a travel lodging website, decided three years ago to remove rental listings in Jewish settlements in the West Bank. It folded fairly quickly under legal pressure in these states, along with a housing discrimination lawsuit, eventually relisting the properties with a promise to donate the profits from its rentals to worthwhile causes and to apply the same policies to other select disputed territories in the Caucasus region.

“Airbnb didn’t want to be in the position of being branded with the Scarlet A, or, in this case, the Scarlet B,” said Stern.

Ben & Jerry’s seems to harbor no such fears, but Unilever does and, according to Bloomberg investment data, Florida, Texas, New Jersey, Arizona, Illinois and Mississippi, all anti-BDS states that have pension divestment rules, all have pension funds currently invested in Unilever.  This puts Unilever in a difficult position.

“I would suggest they take a deeper look at the agreement they have with Ben & Jerry’s. I think Unilever was simply caught off-guard by how quickly this all spiraled. They’re indicating that their hands are tied. But a parent company ultimately controls its subsidiary,” said Kontorovich.

“The internal structure of a company can’t be used as a legal defense. Ultimately there is generally contractual language that would protect a parent company if its subsidiary is doing financial harm. Bottom line is that there is always the option to sell the brand. There is always a way out. Unilever will need to figure it out,” he said.

What Ben & Jerry’s did, though, is state loud and clear that they are engaging in a boycott on ideological grounds. They’re making a stand. And it will be costly.

McDonald’s has come under somewhat similar pressure before in Israel. Its franchises in the country are owned and operated by a well-known left-wing activist, Omri Padan. McDonald’s Israel has controversially passed up opportunities to open stores in the West Bank, noting that it has been a long-standing McDonald’s company policy not to operate beyond the pre-1967 lines. So, what’s the difference between its stance and that of Ben & Jerry’s?

“There isn’t anything legally wrong with a company choosing not to do business in the West Bank. You can’t force them. McDonald’s never explicitly said why it won’t expand out,” said Stern.

“Maybe it’s because they don’t think they can be profitable in the West Bank. Maybe it’s because the Jewish settlements want kosher food while the Arab cities and villages want halal and it becomes too complicated. Maybe the towns are too small or transporting goods is too costly. Any business can come up with perfectly good reasons. What Ben & Jerry’s did, though, is state loud and clear that they are engaging in a boycott on ideological grounds. They’re making a stand. And it will be costly,” he said.

That cost will be borne only partially by Ben & Jerry’s, and more fully by Unilever, making the conglomerate the most unlikely and unwilling boycotter of Israel thus far.