To Sell or Not to Sell to the Government and What About Hollywood


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During summer legislative recess, we’ve had a chance to catch up on some of the questions that burbled up last session. Heading the list of campfire conversations was whether manufacturers could profitably operate on a business model that restricts sales of firearms, ammunition, and/or accessories to a federal, state, or local municipality that prohibits the sale of the same products to civilians?
 
On the supply-demand side of the debate was the simple truth that another company would likely fill the order.  On the marketing side of the debate was whether the earned media play from such a company policy would compensate for the loss of revenues in that one market segment.
 
Connecticut is far from the only state to permit production of otherwise impermissible firearms, ammunition, and accessories when the assembly line runs for government contracts.  It provides an example for our discussion in its recently passed Public Act 13-220, providing that “large capacity magazines” can be manufactured in Connecticut for sale to “Members or employees of the Department of Emergency Services and Public Protection, police departments, the Department of Correction or the military or naval forces of this state or of the United States for use in the discharge of their official duties or when off duty” and to “Employees of a Nuclear Regulatory Commission licensee operating a nuclear power generating facility in this state for the purpose of providing security services at such facility, or any person, firm, corporation, contractor or subcontractor providing security services at such facility.”  It also contained a provision exempting the sale of “assault weapons” to these categories of government use.  Such transactions are otherwise criminal felonies.
 
Compare and contrast that green light from the state as against those private companies that have decided not to offer their products for sale to one or more government entities at the national, state, or local level.
 
At least 140 companies have publicly announced policies that they will not sell proscribed items to governments that prohibit the same items as civilian purchases.  There is at least one company in each of the following states that limits or restricts sales in this manner, including AK, AZ, CA, CO, CT, DE, FL, GA, HI, IA, IL, LA, MD, MI, MN, MT, NH, NJ, NY, OH, OK, MA, MN, TN, TX, VA, VT, WA, WI, WY, and Washington, DC.  The company statements are publicly issued through Press Releases, YouTube videos, and Facebook posts. 
 
For many companies, it’s a new policy; for others, it’s a long-standing policy for more than a decade.  It’s being called closing the “police loophole,” and it’s being phrased as a suspension of “buying rights.”
 
The pick-up for these companies is tapping into the network of similarly-minded consumers who publish running lists like a mini sales force to encourage others to support these companies.  One company, DoubleStar Corp, reportedly received almost 3,000 Facebook “likes” in the first 24-hours after they made their policy statement
 
These company declarations can be strong.  Trident Armory went so far as to announce as of a specific date all contract bids and offers, as well as then current production contracts, would be considered null and void.  And retailer J&G Sales acknowledged in their statement that they expected to “lose some revenue from government purchases.”
 
It will certainly be worth keeping an eye on this new form of advertising.  Marketing for women and marketing for the environment come to mind as large, specialty market segments that have emerged and stabilized as central marketing concepts.  What will make this approach of philosophy-meets-the-bottom-line is that the overwhelming majority of manufacturers are privately held companies with little data for analysts to chew as they ponder.
 
And, tucked into the campfire chat on a lighter, but a no less economically significant note, was the dwindling question on whether New York would grant a “Hollywood exception” to the NY SAFE Act.
 
Enacted on January 16, 2013, the NY SAFE Act grabbed a pick-up amendment to carve out exceptions for law enforcement, relative to where we started this conversation.  But, the second category of question that popped up remains unanswered:  does there need to be a statutory exemption for the use or portrayal for movies or television of firearms, ammunition, and accessories that are otherwise restricted? 
 
This question is being bantered as a “Hollywood exception,” which would clarify that props could be used in film and television productions.  Pre-SAFE Act, a production company could obtain permits and insurance, and use a licensed prop gun supplier to bring these otherwise illegal replicas onto the set, where licensed pyro-technicians and gun handlers supervise the firing of blanks.
 
The SAFE Act passed and the movie and television industry called for an express exemption.  According to a recent New York Times article, industry workers stated it would be “impractical to try to manufacture fake weapons that could fire blanks.” http://www.nytimes.com/2013/05/02/nyregion/studios-fret-that-new-yorks-gun-laws-could-hamper-film-production.html?pagewanted=all&_r=0
 
There’s legislative opposition to such an amendment, which includes the NYS Senate Majority Leader, who has been quoted as saying that he won’t do for Hollywood what he can’t do for others. 
 
And so it was that a politically charged winter and spring faded to black, the campfire died down, and we thought it best to enjoy a lazy star-filled sky.  The start of legislative session in Washington, DC begins bright and early on Monday, September 9.