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FIGHTING CHAIN
STORES PAST AND PRESENT:
THE ROOTS OF THE CAMPAIGN AGAINST WAL-MART
By Philip
Mattera
Over the
past year, there has been an extraordinary
mobilization of energy and resources devoted
to challenging the economic and political
muscle of a single company: Wal-Mart Stores,
the retailing behemoth that now reigns as
the largest corporation in the world. Not
one but several campaigns are now working
exclusively on this target.
Wal-Mart
Watch was launched in April 2005 to
serve as “a catalyst for
coordinated action and a unifying voice to
counter Wal-Mart’s multi-million dollar
media and public relations blitz.”
Wake
Up Wal-Mart calls itself “a
vehicle through which millions of Americans
can join together, from neighborhoods all
across our nation, to harness the power of
our consumer behavior and use it to
reform…America’s largest corporation.” Just
recently, the
Wal-Mart Alliance for Reform Now was
created as “a coalition of
individuals, community organizations, labor
unions, neighborhood associations, immigrant
alliances, civil rights groups, women’s
organizations, environmental groups, and
consumer groups [that] provides the voice
for citizens to force Wal-Mart to be
accountable to community standards and
values.” Other organizations such as the
AFL-CIO have also launched special Wal-Mart
initiatives.
While it
may be unprecedented to have so much focus
on reforming a single company, the mounting
of a challenge to large-scale corporate
retailing has been seen before in U.S.
history. In fact, it was exactly 75 years
ago that an eruption of protest against
Wal-Mart’s forerunners reached its zenith.
Looking back at the anti-chain store
movement of the late 1920s and 1930s
provides some remarkable historical
parallels and may prove valuable to today’s
campaigners.
“MASS DISTRIBUTION FOR MASS PRODUCTION”
Chain
stores date back to the 19th
Century. George Huntington Hartford opened
the first outlet of the Great Atlantic &
Pacific Tea Company (or A&P) in Manhattan in
1859. He soon widened his offerings to
coffee and spices and later a full line of
groceries. Frank Woolworth began his string
of variety stores selling items priced at
five or ten cents in the 1870s. Yet it was
not until the early 20th Century
that these and other chains reached a
significant size. After World War I they
began growing more rapidly, and during the
1920s they multiplied as never before.
At the start
of that decade, the 20 leading chains had
fewer than 10,000 stores. By the end of the
decade, they had more than 37,000. A&P, the
leader in the grocery segment, jumped from
about 4,500 to more than 15,000. In apparel,
J.C. Penney went from about 300 to more than
1,400. And in the drugstore sector,
Walgreen’s leaped from 23 to 440. The impact
in market share terms was most dramatic in
groceries. By 1929, A&P and competitors such
as Kroger and Safeway had captured nearly 40
percent of the market.
In rhetoric
echoed today by Wal-Mart and its defenders,
the chains argued that they were efficient
providers of low-priced goods for the
masses, thus helping to generate
unprecedented prosperity. Likening
themselves to the big manufacturers such as
Ford Motor, they promoted the theme “mass
distribution for mass production.” The large
retailers created a trade group, the
National Chain Store Association, to be
their advocate, and a magazine called
Chain Store Age (still published today)
was founded to chronicle their achievements.
Not everyone,
however, was celebrating the chain takeover
of retailing. Local merchants, of course,
were threatened by the trend, and many of
them spoke out. Echoing the protests that
had accompanied the rise of the big
mail-order houses—Sears, Roebuck and
Montgomery Ward—several decades earlier,
independent retailers charged that the
chains were undermining the tradition of
Main Street American life. Using predatory
pricing, they said, the chains were
destroying smaller businesses that were
integral to the local community.
INDEPENDENTS PLAY HARDBALL
Independents
didn’t limit their campaign to emotional
appeals. Their trade associations,
especially the National Association of
Retail Grocers and the National Association
of Retail Druggists, played hardball,
arguing that the chains defrauded consumers
with short weights and shoddy merchandise.
They also charged that the big retailers
used bait-and-switch tactics and raised
prices after capturing a local market. Just
as Wal-Mart is today accused of draining
revenues from local communities, the chains
of the 1920s were denounced for transferring
profits to distant headquarters and for
enriching big Eastern banks in the process.
The
independent retailers soon found themselves
supported by a hodgepodge of organizations
and prominent individuals similarly
concerned about the growing power of the
chains. These sympathizers included both
farmers and labor unions, African-American
leaders and the Ku Klux Klan. The Klan
feared that the chains were undermining
white communities with outside influences,
while A. Philip Randolph, founder of the
Brotherhood of Sleeping Car Porters, argued
that the weakening of small business was bad
for the economic advancement of blacks.
Farmers were worried that powerful grocery
chains could force down agricultural prices,
while unions criticized long hours and low
wages in chain stores. In other points
echoed in today’s Wal-Mart controversy,
unions warned that the market power of
chains allowed them to squeeze their
suppliers and thus depress wages in the
manufacturing sector.
Opposition to
the chains escalated slowly through most of
the 1920s and then soared at the end of the
decade. The main catalyst for this upsurge,
according to historians, was a wealthy
businessman in Shreveport, Louisiana named
W. K. Henderson. In addition to an iron
foundry, Henderson owned radio station KWKH.
Around the time of the 1929 stock market
crash, Henderson, a supporter of the
populist politician Huey Long, began
delivering blistering anti-chain diatribes
on the station, which reached a wide
audience across the South and in parts of
the Midwest. Soon Henderson was a national
sensation, and his criticism of the big
retailing corporations was echoed by local
groups that sprang up throughout the
country. Within months, these groups existed
in an estimated 400 cities and towns. This
led to the creation of several dozen
anti-chain newspapers with names such as
Chain Store Menace as well as numerous
radio stations that followed Henderson in
denouncing the chains via the airwaves.
Among the
states with the most intense activity were
Minnesota (especially a group called Break
the Chains), Wisconsin (an organization
called Community Builders as well as the
Progressive Party), Texas and Nebraska. The
Nebraska effort won the support of the state
attorney general, whose office produced a
study documenting predatory pricing by the
Safeway grocery chain. Henderson himself
formed a national organization called the
Merchant’s Minute Men. It held a convention
of several thousand delegates in 1930 in
Shreveport, but its growth was limited by
concerns that Henderson was exploiting the
movement for personal profit. Labor
activists were also angered to learn that
his foundry had engaged in union-busting.
TURNING TO GOVERNMENT FOR HELP
For the most
part, the anti-chain movement did not focus
on boycotts. There seemed to be a general
recognition that it was hopeless to get
consumers, particularly during a severe
economic downturn, to avoid the stores with
the lowest prices. Instead, the movement
turned to government—local, state and
federal—for assistance in battling the
chains.
Even before
the upheaval of 1929-1930, the trade
associations of the independents and other
anti-chain groups were looking to public
officials for relief. Their first strategy
was to seek federal legislation mandating
price maintenance. In 1926 Sen. Arthur
Capper of Kansas held hearings to highlight
the danger to small retailers posed by
chain-store price cutting, especially the
use of loss leaders (selected items sold
below cost to lure shoppers into the store).
A bill called the Capper-Kelly Act
(co-sponsored by Rep. Clyde Kelly of
Pennsylvania) won the support of some large
industrial firms, which saw it as a way to
limit the ability of chains to exert
downward pressure on the price of
manufactured goods. Portraying themselves as
friends of the consumer, the chains lobbied
hard against the bill, which ultimately
passed the House but was blocked in the
Senate.
In the
interim, chain opponents managed to get a
resolution passed in the Senate calling for
the Federal Trade Commission to undertake a
study of chain-store pricing. Unfortunately
for the movement, the FTC embarked on an
exhaustive research effort that ended up
lasting six years. Moreover, the Commission
concluded that the chains were not violating
federal antitrust laws.
As reform
stalled at the federal level, the resurgent
anti-chain movement turned to state and
local governments. Activists paved the way
by arguing that the chains were not paying
their fair share of state and local taxes.
This made it easier for the movement to push
for the imposition of taxes (or license
fees) on chains that were designed mainly to
discourage their growth, rather than simply
getting them to shoulder more of the fiscal
burden.
Bills of this
sort began to get introduced in state
legislatures in the mid-1920s. Most failed
but the ones in North Carolina, Georgia and
Maryland passed and were signed into law.
All three were struck down in the courts,
but the anti-chain movement did not give up.
Their effort was bolstered by a 1931 U.S.
Supreme Court ruling that states could tax
chain stores differently than independent
ones. Ultimately, more than two dozen states
enacted chain-store tax bills. Some
localities imposed their own taxes,
beginning with Portland, Oregon in 1931.
In addition to
the per-store license fees, states began to
discourage large-scale retailing by imposing
taxes on all retailers based on their sales
volume. The first such measure, passed in
Kentucky in 1930, started at one-twentieth
of one percent for smaller businesses but
jumped to 1 percent on sales of $1 million.
Since sales at the various outlets of a
chain were amalgamated, the tax hit the
chains especially hard. The U.S. Supreme
Court viewed this sort of tax differently
from the license fees and struck it down.
The high court did, however, uphold a
Louisiana law that based state license fees
for chains on the number of stores they had
nationwide.
After Franklin
Roosevelt took office in 1933, the
anti-chain movement had high hopes for
decisive action by the executive branch.
Activists were encouraged by the creation of
the National Recovery Administration, which
was supposed to regulate competition and
enforce standards of conduct. Although FDR
adopted some of the rhetoric of the
anti-chain movement, the chain stores
managed to get the NRA’s retail code written
to their advantage.
In response,
the anti-chain groups sought to whip up
public support, which had waned somewhat
from the heady days of 1930. A key element
of this effort was the promotion of a
muckraking documentary film called
Forward America that was produced by
former NRA official Frank Wilson. Showings
of the film, which castigated the chains for
undermining economic opportunity, were
arranged throughout the country—much like
today’s plans for a forthcoming film on
Wal-Mart by Robert Greenwald. A flyer for
one of those showings stated:
At last
here is the dynamite that will blast the
chain stores and mail-order houses from your
community…If you want to know the truth
about the depression, see “Forward America…”
You can help solve America’s greatest
illness by having “Forward America” shown in
your community.
PATMAN TAKES THE LEAD
In 1935 the
anti-chain forces raised a stink about the
creation of the American Retail Federation,
a new trade association that appeared to be
an effort by the big retailers to undercut
the lobbying efforts of the independents. In
an action that illustrated the continuing
political clout of the anti-chain movement,
Congress agreed to investigate the
Federation. The chairmanship of the
investigating committee ended up with Rep.
Wright Patman of Texas. Patman, who had
populist leanings, initiated a wide-ranging
probe that turned up embarrassing evidence
about chain business practices as well as
indications that chains such as Kroger had
created bogus advocacy groups to divide its
opponents.
Buoyed by the
investigation, Patman co-sponsored a bill
with Senate Majority Leader Joe Robinson to
tackle the chains by outlawing the special
rebates manufacturers gave to the chains.
Many independent business groups rallied in
support of the Robinson-Patman Act, and even
organized a meeting in Washington in March
1936 that drew about 1,500 participants. The
chains and their allies lobbied intensively
against the bill, gaining support from the
nascent consumer movement, but Robinson
pushed it through. The law remains in effect
today, but it has not been vigorously
enforced for several decades.
Meanwhile, at
the state level, legislatures were
supplementing the initiatives on chain taxes
with fair trade laws, which allowed
manufacturers to set a minimum price at
which their goods would be sold. These
measures, designed to limit the
price-cutting power of the chains, were
getting struck down in the courts as
violations of the Sherman Act, so in 1937
Congress passed the Miller-Tydings Act,
which exempted the state fair trade laws
from federal antitrust rules.
Patman then
set out to deliver the coup de grace to the
chains. In 1938 he proposed legislation that
would have established a severe federal tax
on interstate chains. This time the
opposition from the chains—as well as from
labor, farm and consumer groups—was more
intense. Claiming that the tax would have
amounted to far more than the total profits
of many companies, opponents accused Patman
of seeking a “death sentence” for the
chains. In the end, it was Patman’s bill
that died—and with it the anti-chain
movement.
Historians
point to a variety of factors in explaining
the downfall of the anti-chain movement, but
certainly one of the most significant was
the loss of support from organized labor.
Initially, unions saw the chains as a force
for lowering wages and eroding working
conditions. By the late 1930s, however, the
chains were viewed as a ripe organizing
target rather than an evil to be eradicated.
One of the
first union offensives to occur after the
successful 1937 sit-down strike at the
General Motors plant in Flint, Michigan was
a similar action by workers at a Woolworth
store in downtown Detroit. A combination
hunger strike and sit-down strike among
Woolworth employees in New York City led to
rapid union recognition. In April 1938 AFL
President William Green met with A&P
officials and agreed not to support Patman’s
“death sentence” bill in return for the
company’s commitment not to oppose
unionization.
It is not
possible here to give a thorough analysis of
whether this gambit finally paid off for
labor. It is worth noting, though, that only
a few years later, the chief executive of a
major national retailing company was
involved in one of the most famous incidents
in U.S. labor history. In 1944 Sewell Avery,
head of Montgomery Ward, defied an order
from President Roosevelt to cooperate with
unionization of the firm. FDR used his
wartime powers to seize the company and had
Avery forcibly removed from his office. A
photograph of Avery being carried out by
National Guardsmen became a classic symbol
of corporate resistance to collective
bargaining.
REFORM VS. ABOLITION
One theme that
emerges from this brief history of the
Depression-era anti-chain movement is the
difficulty of maintaining common ground
among the various interests that were
opposed to the growing power of the national
retailers. Back then, it was independent
merchants who took the lead and promoted
policies that were quite self-interested.
This was clearest when it came to the price
question. The independents promoted policies
such as price maintenance that were not
beneficial to shoppers, and thus it was no
surprise that the newly emerging consumer
movement did not jump on the anti-chain
bandwagon. Unions also ended up questioning
the wisdom of propping up prices when it
came to the economic well-being of their
members. Anti-chain activists tried making
arguments along the lines of what today’s
campaigners call “the high cost of low
prices,” but that was a difficult sell
during the Depression.
For a while,
there was relative consensus on government
action such as the state chain tax laws,
which are reminiscent of today’s efforts to
get Wal-Mart to pay its fair share of
employee healthcare costs. Yet there is
little evidence that the tax measures
succeeded in slowing down the spread of the
chains. In fact, an argument can be made
that they actually strengthened the larger
chains in relation to the smaller groupings,
which were less able to absorb the added
cost.
There was also
the perennial question of whether a movement
can be sustained when it becomes centered on
a legislative strategy, whether at the state
or federal level. Even when anti-chain bills
were enacted, they inevitably became
embroiled in drawn-out challenges in the
courts, which are not the most favorable
arena for weakening corporate power.
Perhaps the
most difficult hurdle for the movement to
overcome was the tension between those who
wanted to reform the chains and those who
wanted to do away with them. Even among the
independent retailers, there were
differences on this issue. Hardliners wanted
to ban the ownership of more than one retail
outlet, while others saw nothing wrong in
small chains and sought to keep the focus on
the giants of the industry. There were also
diverse views on what were known as
voluntary chains—arrangements such as the
Independent Grocers of America (IGA) in
which independently owned stores banded
together to compete with the likes of A&P
and Woolworth.
In the end, it
may have been decisive that two of the most
important political forces of the day,
organized labor and Rep. Patman, came to
diametrically opposed positions on the
reform vs. abolition question.
CUTTING WAL-MART DOWN TO SIZE
Today’s
anti-Wal-Mart campaigns face similar
challenges in achieving solidarity. The
independent retailers are less prominent in
the movement than 75 years ago, but there
are new players such as environmental
activists, site fighters and class-action
lawyers. Organized labor has a key role at
the national level—involving unions that
seek to represent Wal-Mart employees as well
as those that want to stop the spread of the
“Wal-Mart model” to other employers—but it
remains to be seen how well they will be
able to cooperate amid the disunity in the
AFL-CIO.
The fact that
the contemporary anti-chain movement focuses
on a single company may prove to be an
advantage compared to the Depression-era
assault on an entire industry. It is also a
hopeful sign that the debate is less
polarized. No one considers it realistic to
call for Wal-Mart’s obliteration, yet the
major campaigns are seeking fundamental
changes in just about all of the leviathan’s
practices and policies. Compared to Wright
Patman’s utopian effort to make the chains
disappear, the current approach is a more
level-headed attempt to cut the adversary
down to size and make it behave in a
socially responsible manner. If the
campaigns can stay unified, that just might
happen.
BIBLIOGRAPHY
Edward G.
Ernst and Emil M. Hartl, “Chains Versus
Independents,” a series of four articles in
The Nation, November 12, November 19,
November 16 and December 3, 1930.
F. John
Harper, “’A New Battle on Evolution’: The
Anti-Chain Store Trade-At-Home Agitation of
1929-1930,” Journal of American Studies,
vol. 16, December 1982.
F. John
Harper, “The Anti-Chain Movement in the
United States, 1927-1940,” Ph.D.
dissertation, University of Warwick, 1981.
David
Horowitz, “The Crusade Against Chain Stores:
Portland’s Independent Merchants,
1928-1935,” Oregon Historical Quarterly,
Winter 1988.
Godfrey M.
Lebhar, Chains Stores in America:
1859-1962. Third edition. New York:
Chain Store Publishing Corporation, 1963.
Joseph C.
Palamountain, The Politics of
Distribution. Cambridge: Harvard
University Press, 1955.
Thomas W.
Ross, “Store Wars: The Chain Tax Movement,”
Journal of Law and Economics, vol.
29, April 1986.
Carl Ryant,
“The South and the Movement Against Chain
Stores,” Journal of Southern History,
vol. 39, May 1973.
Harry W.
Schacter, “War on the Chain Store,” The
Nation, May 7, 1930.
Richard C.
Schragger, “The Anti-Chain Store Movement,
Localist Ideology, and the Remnants of the
Progressive Constitution, 1920-1940,”
University of Virginia Public Law and Legal
Theory Working Paper Series, No. 21,
February 2005. Online at
http://law.bepress.com/uvalwps/uva_publiclaw/art21
Cory Lewis
Sparks, “Locally Owned and Operated:
Opposition to Chain Stores, 1925-1940,”
Ph.D. dissertation, Louisiana State
University, 2000.
Nancy Beck
Young, Wright Patman: Populism,
Liberalism & the American Dream. Dallas:
Southern Methodist University Press, 2000.
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