Mattel in crisis mode

When companies get into big trouble, there are established rules for containment. You must act quickly, act cohesively and try not to point the finger at anyone. Mattel will be faced with lawsuits and financial charges, of course, but the key is to minimize the damage, especially with the holiday season just around the corner. Law Blog caught up with Victor Schwartz, head of the public policy practice at Shook Hardy & Bacon, to pick his brain. He is the author of a leading casebook on torts, the former dean at the University of Cincinnati College of Law and a leading tort-reform advocate.

What good companies do in these situations is avoid looking at the situation in one dimension. The problems need to be looked at in three dimensions: the litigation dimension, the public-relations point of view and from a governmental regulations point of view. You’re not going to believe me when I tell you this, but often you’ve got these three departments within a company working in three different silos when something like this happens. They’re not even talking to each other.

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You’ve got to act quickly. Your problem is like a stock option — its value changes over time. Some action promptly is much better than sitting around for a month waiting for the perfect action while everyone sits around wondering if your company is in the business of poisoning children. Any delay hurts the company’s name. Remember the Pinto? Nobody will ever buy another Pinto. But Tylenol still exists. Why is that? Because Ford dawdled when its Pinto problems broke out. With Tylenol, Johnson & Johnson recalled the product, put sealed caps on the bottles and redesigned its pill. Today, the Tylenol brand is worth billions. Another reason you’ve got to act quickly: Every lawsuit is theoretically looked at by a jury — and you’ve got two weeks from the beginning of the problem to affect the way the problem is looked at by the jury pool, which, in a situation like this, is effectively the entire country. If people see you acting responsibly, if you immediately establish an easy way for people to return products, you’re going be seen as doing the right thing. You’re also going to lessen the impact of consumer protection class-action cases come along.