The Trump administration’s attempt to declare artificial intelligence firm Anthropic a national security risk was temporarily blocked last week by a federal court. The administration sought to not only sever the Defense Department’s relationship with Anthropic, but to prohibit other businesses that contract with the federal government from using its products as well.
This amounts to a secondary boycott, a practice that corporations and unions are prohibited by law from attempting. It’s worth exploring why, because a federal government free to impose secondary boycotts would have enormous powers over the private economy.
A boycott is a decision to not do business with an organization as a form of protest against that organization. When individual consumers do that, it is protected by the First Amendment. But a secondary boycott takes the logic of a boycott to the next level. It seeks to punish third parties to the dispute — say, suppliers of the protested company — in the hopes that they will also pressure the target to change its ways.
The Trump administration also flirted with a secondary boycott when it required government contractors to disclose business they did with politically disfavored law firms; the intention was to prompt contractors to think twice before hiring firms the administration opposes.
Individual consumers usually don’t have the market power to make a secondary boycott effective, but corporations and unions can sometimes pull them off. Federal law restricts that activity for good reason.
The National Labor Relations Act bars unions from engaging in secondary boycotts or strikes. It also prohibits unions and employers from agreeing to contracts that include secondary boycott provisions. This prevents, for example, the Teamsters from negotiating a contract that says their drivers will refuse to carry goods made by a firm that a different union is striking against — once a common practice.
When corporations try to do secondary boycotts, they can run afoul of antitrust laws. For example, a department store in San Francisco in the 1950s conspired with an appliance store to not sell appliances to a competitor. The Supreme Court ruled that was an illegal restraint of trade.
But secondary boycotts do allow organizations to take advantage of the interconnectedness of the economy to enlist all of society in their disputes. A large corporation might have thousands of other businesses that it contracts with. Secondary boycotts are exponentially more disruptive than primary boycotts. They put huge swaths of the economy at risk of being boycotted by someone, somewhere, for some reason.
When the federal government is the entity ordering a secondary boycott, the effects are an order of magnitude greater still. The federal government is the world’s largest customer. Under the guise of national security, its secondary boycott could have prevented more than 100,000 firms from doing business with Anthropic.
If the Pentagon doesn’t want to do business with Anthropic, that’s its choice. But this is a dispute between Anthropic and the Defense Department, not every government agency and all of their private-sector partners.
Secondary boycotts are illegal for corporations and unions because they are contrary to the functioning of a free-market economy. That’s all the more so when the boycotter has the monopoly on the legitimate use of force. One agenda item for free market oriented lawmakers: Limit this government tactic.
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