The Home Town Advantage Bulletin
Issue #11 - August 2002
-- About this Bulletin
-- Newspapers Suffer When Local Stores Close
-- Big Box Sprawl Causes Sharp Rise in Police Costs
ALLIANCES AND COOPERATIVES
-- "Independents Week" Celebrated in Tampa
-- Community HeroCard Promotes Local Businesses and Volunteering
-- Iowa Reconsiders Link to Amazon on State Web Site
-- Old Saybrook, Conn. Bans Superstores
-- Big Box Moratorium on Ballot in Ellsworth, Maine
-- Dallas Rejects Urban Superstore
-- New Yorkers Fight Chain Incursion
-- Hood River Residents Link "Arms Around Our Town"
-- Denver's Asian Businesses Force Wal-Mart Retreat
-- Small Businesses Fight Abuse of Eminent Domain
-- Wal-Mart Approval Challenged in New Orleans
-- At Borders, Mega-Publishers Given Keys to the Kingdom
-- Mexico Investigates Wal-Mart for Antitrust Violations
-- Video Store Lawsuit Dismissed
-- Development Moratoria
-- Community & Environmental Defense Services
-- Big Boxes: Unwise Investments
-- Corporate Chains at the Public Trough
-- Elsewhere in the Media
ABOUT THIS BULLETIN
In communities across the country, citizens are taking action to defend
and strengthen their local economies. The Institute for Local
Self-Reliance (ILSR) has been tracking these efforts and will use this bulletin
to provide bimonthly updates on significant developments. We hope it
will serve as a tool for making connections and sharing strategies within
this growing movement. We encourage readers to share news and resources
by sending email to firstname.lastname@example.org
Many thanks to the foundations and individuals who've provided funding
for the production of this bulletin, and to the Boulder Independent
Business Alliance (http://www.boulder-iba.org
) for funding the cost of our
email publishing service and thereby keeping this bulletin ad-free.
ILSR is a nonprofit organization providing research, analysis, and
innovative policy solutions for building healthy communities and strong
local economies. This bulletin is part of ILSR's New Rules Project
), which publishes a quarterly journal, The New
Rules; several electronic bulletins on specific issues; and books,
including The Home Town Advantage: How to Defend Your Main Street Against
Chain Stores and Why It Matters. We also maintain a web-based
clearinghouse of model public policies at http://www.newrules.org.
Another good source of news on local efforts to keep megastores at bay
is the NewsFlash! section of the Sprawl-Busters web site
). Additional links and organizations are
listed at the end of each story.
If you're not already receiving this newsletter directly, subscribe by
sending a blank email to:
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Back issues are available at http://www.newrules.org/hta/index.htm.
I. NATIONAL NEWS
NEWSPAPERS SUFFER WHEN LOCAL STORES CLOSE
Local newspapers suffer a double blow when giant chains like Home Depot
or Wal-Mart come to town. Not only do these companies rarely advertise
in local newspapers, but they usually force dozens of independent
retailers to close, eliminating significant sources of newspaper ad revenue.
In a recent article in Editor & Publisher, Mark Fitzgerald describes
the deadly impact that the rise of corporate chains and decline of
locally owned businesses has had on local newspapers.
In Kirksville, a town of 17,500 in northern Missouri, the arrival of a
Wal-Mart supercenter a few years ago put four clothing stores, four
grocery stores, a stationery store, a fabric store, and a lawn-and-garden
center out of business. The Kirksville Daily Express has struggled ever
Wal-Mart generally relies on direct mail and national television ads.
Only occasionally does the company run newspaper ads or inserts.
Wal-Mart's first generation of stores were bad enough for local newspapers,
but its new supercenters are proving to be especially damaging.
Supercenters are about twice the size of the earlier Wal-Mart stores and include
a full-service supermarket. Wal-Mart's entry into the grocery business
in the mid-1990s caused a wave of mergers among existing supermarket
chains and forced many chain outlets as well as independents to close.
Newspapers rely heavily on revenue derived from supermarket inserts.
"These are $20,000 to $60,000 accounts," notes Scott Champion, executive
vice president of Liberty Group Publishing, which owns several small
town newspapers. "How do you make that up? It's impossible."
Newspaper ad revenue from grocery stores fell 10 percent between 1995
and 2000, according to the trade magazine Presstime. The decline is
expected to continue as Wal-Mart rolls out more supercenters and the sector
Consolidation in other sectors is also taking a toll. Home Depot
usually heralds the death of eight or nine small-but-reliable accounts, John
W. Kelly, advertising director of The News Tribune in Tacoma,
Washington told Presstime. Home Depot does buy some advertising, he says, but
those dollars "don't offset what you lose" when lumberyards and hardware
-- "Wal-Mart's Deadly Impact on Advertising" by Mark Fitzgerald in the
May 27, 2002 issue of Editor & Publisher:
-- "This Year's Retail," by Elise Burroughs in the March 2001 issue of
BIG BOX SPRAWL CAUSES SHARP RISE IN POLICE COSTS
Many city officials welcome large chain retailers for the tax revenue
that create. Rarely do they consider the other side of the balance
sheet: the tax losses that occur when chains displace local stores and the
added costs of providing roads, sewers, police, fire, and other public
services to the sprawling new development.
Added police costs are proving especially difficult for many
communities that once welcomed big box stores. Take Port Richey, Florida, for
example. This small town of about 14,000 people on the state's western
coast was thrilled to attract a Wal-Mart supercenter last year. The store
generates about $75,000 annually in tax revenue.
But be careful what you wish for. The town now says that new police
costs associated with the store far exceed the new revenue. According to a
report in the St. Petersburg Times, the supercenter generates a large
number of police calls and accounts for one in four arrests. Many of
these calls are for suspected shoplifting, which requires several hours of
police time, during which there are no patrols of the streets.
Non-emergency response times have risen dramatically. The number of traffic
citations issued has been cut in half. Overtime hours have mushroomed. The
department started the year with an overtime budget of $22,000, but has
already spent $70,000.
Port Richey is not alone. In North Versailles, Pennsylvania, big box
development caused the police force to grow from 10 to 26 officers over
the past four years. In Tappahannock, Virginia, Police Chief James
Barrett described a new Wal-Mart as "a strain on services."
Police departments are increasingly weighing in on proposals for new
retail development. Earlier this year the Dallas Police Department issued
a memo stating that a proposed Wal-Mart would dramatically increase the
department's workload. In Greenland, New Hampshire, both the police and
fire departments have cautioned city officials about the costs of a
proposed shopping center.
II. ALLIANCES AND COOPERATIVES
"INDEPENDENTS WEEK" CELEBRATED IN TAMPA
Posters declaring "Celebrate Independents Week!" greeted customers of
local stores in Tampa, Florida, during the week of July 4th. "As we
celebrate our nation's independence, we invite you to join us in
celebrating our great local independents," the posters read.
Independents Week was conceived by Carla Jimenez, co-owner of Inkwood
Books. For several years, Inkwood has used Independence Day as an
opportunity to remind customers of the importance of locally owned businesses
to the community. "At the last minute this year, I decided to see if
other local businesses wanted to get involved," explains Jimenez.
She called around and seventeen businesses agreed to sign-on. They
included a record store, hardware dealer, several restaurants, a natural
foods store, and a print shop. In addition to displaying the posters and
talking to customers, each business held a drawing at the end of the
week, where customers could win $60 in gift certificates for the other
They also sent out a press release. The Tampa Tribune responded with
extensive coverage on the front page of the metro section. The local Fox
affiliate decided to broadcast its morning news show from a different
independent business every day that week.
"The key was that it was so simple. There were no meetings and very
little time involved," says Jimenez, who has long wanted to organize the
community's local retailers for joint promotional and educational
events, but has never found the time. Based on comments from her own
customers, she says, "It was definitely worth it."
The seventeen merchants plan to get together in August to discuss the
response to Independents Week and perhaps plan another event for the
fall. Jimenez hopes this will lay the foundation for further collaboration
and a permanent association down the road.
COMMUNITY HERO CARD PROMOTES LOCAL BUSINESSES AND VOLUNTEERING
A new program in Minneapolis rewards residents for supporting locally
owned businesses and volunteering at local nonprofits. Developed by CHC
Data Inc., the new Community HeroCard enables residents to earn rebates
by shopping at more than 40 local stores. The rebate doubles if the
cardholder volunteers at a nonprofit organization.
The card looks like a credit card with a magnetic data strip that works
in a standard debit card machine. Swiping the card accesses the
customer's account and enables merchants to add and subtract rewards.
The card functions in part like a loyalty card program, similar to
those offered by many national chains, but with the added advantage of
allowing customers to spend rebates earned at one business at any of the
participating stores. Each business decides how much of a rebate to
provide. Rebates range from 5 to 20 percent, and average just over 10
In a typical transaction, a $50 purchase would generate a rebate of $5
from the merchant. CHC Data would collect $1 to fund the program and
cover marketing costs. The cardholder would earn a $2 credit that could
be spent at any of the participating stores. The remaining $2 would also
be credited to the cardholder if s/he volunteers at a local nonprofit.
If not, then the $2 is donated to the cardholder's chosen nonprofit.
The Community HeroCard grew out of a two-year pilot program started in
1997 and funded largely by foundation grants. The original paper-based
system generated interest among local businesses, but was too
cumbersome and time-consuming. CHC Data spent the next few years developing an
electronic system compatible with standard debit card technology.
The first cards were issued in January. About 1,300 are currently in
circulation. A full roll-out and extensive marketing campaign is planned
for the fall. CHC Data hopes to have 40,000 cards circulating by the
end of the year.
Part of the marketing effort will be undertaken by nonprofit
organizations, which plan to sell the cards at fund-raisers. They will receive a
portion of the $10 purchase price, plus the opportunity to earn rebate
dollars and volunteer hours. About two dozen organizations are
participating, including the Green Institute, Lyndale Neighborhood Association,
Asian Media Access, and Hennepin County social service agencies.
Other components of the marketing effort include print and bus-stop
advertisements, direct mail, and window and cash register decals displayed
at local stores.
To participate, local businesses must buy a second debit card machine
or upgrade to a machine capable of handling two channels at a cost of
$250 to $575. Aside from this and the rebates themselves, there are no
One of the major benefits for local businesses is the ability to offer
customers a sophisticated incentive card similar to cards offered by
many chains, but normally too costly for a small business. Additional
advantages include reaching customers of other local stores, being listed
in all Community HeroCard advertisements, and, of course, contributing
to a stronger community.
CHC Data plans to expand to other cities, with Atlanta, Boulder, and
St. Louis currently topping the list of potential sites.
-- Community HeroCard: http://www.communityherocard.com
IOWA RECONSIDERS LINK TO AMAZON ON STATE WEB SITE
The state of Iowa is in the process of removing a direct link to
Amazon.com from the homepage of its official web site (http://www.iowa.gov
Under the new policy, visitors who click on the prominently placed
graphic, "Looking for books about Iowa? Click Here Now," will be directed
instead to a page with links to both Amazon.com and Booksense.com, an
e-commerce site for independent bookstores.
The decision followed a letter sent by the owners of nine Iowa
bookstores. "For the state government of Iowa to send business out of state is
bad enough, but to then compound the problem by further draining state
sales tax revenues is unconscionable," they wrote. Federal policy
exempts out-of-state web and mail order firms from collecting state and
local sales tax.
Iowa's director of digital government, Dan Combs, said that the state
had also received a number of letters from concerned citizens. He said
there had been no "detailed thought process" regarding the decision to
link to Amazon.com. The state receives a percentage of any sales
resulting from the link through Amazon.com's affiliate program.
Booksense.com offers a comparable affiliate program. Launched 18 months
ago, Booksense.com was created by the American Booksellers Association,
a trade group representing some 3,500 independent bookstores. The site
offers more than two million titles. Purchases are credited to the
customer's nearest participating bookstore, based on his or her zip code.
Currently 500 nonprofit organizations, businesses, and authors link to
Booksense.com through its affiliate program. About five percent of the
site's total sales are driven by these links.
-- To learn more about Booksense.com's affiliate program:
IV. NEW RULES
OLD SAYBROOK, CONN. BANS SUPERSTORES
After more than four years of fighting to block three big box
retailers, the town of Old Saybrook, Connecticut, has adopted an ordinance
banning stores over 88,000 square feet. That's about the size of two
football fields, but smaller than a typical Home Depot or Target store. The
new law also restricts commercial buildings in some parts of town to no
more than 25,000 square feet.
Although developers and members of the town's economic development
committee characterized the ordinance as "anti-growth," zoning commission
members cited traffic concerns, strong citizen opposition to additional
large-scale development, and a need to protect the town's character and
individuality. Over the last four years, the town has turned down
Lowe's, Home Depot, and a Wal-Mart supercenter.
-- See the New Rules web site for examples of similar ordinances:
BIG BOX MORATORIUM ON BALLOT IN ELLSWORTH, MAINE
A grassroots group, Citizens Organized for Responsible Development
(CORD), in Ellsworth, Maine, has gathered the 1,109 signatures needed to
place a measure calling for a temporary moratorium on new retail
development on the November ballot.
If it passes, the referendum will suspend construction of retail stores
larger than 80,000 square feet on undeveloped land and commercial
expansion of more than 40,000 square feet on developed land for a period of
The purpose of the moratorium, according to CORD member Audie Tunney,
is to give the city time to address large-scale retail development in
its new comprehensive plan. Ellsworth began revising its comprehensive
plan in 2000 and is expected to complete the process this year.
Ellsworth has a population of 6,500 and is located two hours northeast
of Portland. Tens of thousands of visitors pass through the town each
summer on their way to Acadia National Park.
CORD formed a few years ago in response to large-scale strip
development rapidly overtaking part of the community. "There's a lot of land
available along Route 1A, and nothing to preclude that land from becoming
one strip mall after another," says Tunney.
Last year CORD fought a 208,000 square foot Wal-Mart supercenter. CORD
encouraged residents to contact the Maine Department of Transportation
regarding traffic impacts. MDOT subsequently required Wal-Mart to pay
$4 million in mitigation fees for road improvements. The company chose
to drop the project instead.
-- For more on development moratoria, see:
V. LOCAL BATTLES
DALLAS REJECTS URBAN SUPERSTORE
With much fanfare and, it seemed, the expectation of much praise,
Wal-Mart unveiled plans in April for an "urban" style supercenter in
downtown Dallas. The 220,000-square-foot supercenter would be situated on
Mockingbird Lane in a residential neighborhood near Love Field. Unlike the
standard suburban Wal-Mart, this one would feature a Spanish-style
façade, landscaped gardens, underground parking, and a door that opened
onto the sidewalk.
But residents protested that a nice paint job and a few trees couldn't
make-up for the impacts of such a massive store. "You put red lipstick
on a pig, it's still a pig," said Ronnie Holman, head of a coalition of
neighborhood organizations that fought the development.
The coalition argued that the store, far from being "smart growth," was
completely at odds with the small-scale nature of most urban retail. It
would loom over the area and dwarf every building around it, Holman
argued. It would lead to numerous small business failures and an estimated
11,000 to 18,000 additional vehicle trips each day.
In June, as several hundred residents packed city hall sporting red and
green "No" stickers, the Dallas Plan Commission voted unanimously to
reject Wal-Mart, calling it an "oversized guerrilla."
Wal-Mart had invested heavily in trying to gain approval for the store,
which it hoped would provide a model for building urban supercenters
throughout the country. The company contracted a media consultant,
conducted an extensive direct-mail campaign to sway public opinion, and
employed a former City Council member to present the proposal to officials.
Wal-Mart has said it will appeal to the Dallas City Council, where it
will need to muster twelve of fifteen votes to override the Plan
Commission's decision. The Council is not expected to take up the matter until
NEW YORKERS FIGHT CHAIN INCURSION
"We have a strong sense of community here," says Krista Wergeland, a
resident of Manhattan's Upper West Side and member of a neighborhood
group working to block an incursion of fast-food restaurants and chain
Long known for being unique and down-to-earth, the Upper West Side is
increasingly popular with national retailers like Starbucks, the Gap,
and Barnes & Noble. "You wake up and ask yourself: What's happening to
the identity of this community?" said one resident. "This should be a
neighborhood that meets local needs."
In less than two months, neighborhood activists have gathered more than
3,200 petition signatures against a plan by Tricon Global, which owns
several fast-food chains, to open a Kentucky Fried Chicken on 106th and
Tempted by Tricon Global's offer to pay double the going rent, the
landlord has already kicked out Sambas Deli, a beloved family-owned
business. Sambas was a bit shabby looking, says Wergeland, but it was a great
store that focused on meeting the needs of nearby residents, unlike
Tricon Global, which "doesn't care and doesn't have a sense of
The group is planning a large protest when KFC opens in about a month,
which will be followed by continuous picketing and a boycott. Last
year, a similar boycott of a new CVS, which replaced a local grocery store,
succeeded after just six months when the chain cited substantial losses
and closed the store.
Wergeland hopes KFC will likewise fold. She'd also like to see the
group find a new location for Sambas, as residents did last year for
Broadway Farm, a fruit and vegetable market evicted for a Victoria's Secret
-- Neighbors United Against KFC:
HOOD RIVER RESIDENTS LINK "ARMS AROUND OUR TOWN"
More than 200 residents of Hood River, Oregon, linked arms to form a
giant circle around their downtown one Friday afternoon in late May.
Organized by the Hood River Citizens for Responsible Growth (CRG), the
"Arms Around Our Town" event was designed to demonstrate community support
for locally owned businesses, and to illustrate just how large a
proposed Wal-Mart supercenter would be and how many local stores would be
"It was a great event," said Stuart Watson, CRG co-chair. "It really
helped to remind people that this issue isn't dead." Earlier this year,
both the town and county of Hood River enacted ordinances limiting new
retail stores to no more than 50,000 square feet and establishing a
special review process for commercial development between 25,000 and 50,000
The county's new size limit does not apply to a proposed
185,000-square-foot Wal-Mart supercenter slated for land just outside the town
limits, because the developer submitted an application for the project before
the ordinance was adopted.
Nevertheless, the county should still reject the development based on
its comprehensive plan, contends CRG. "Wal-Mart is directly at odds with
several aspects of the plan," argues Watson. The plan stipulates that
commercial activities should be centralized and strip development should
be avoided. The plan states, "The unspoiled scenic beauty is the
Columbia Gorges drawing card. Jeopardizing this for short term profit may
likely have negative effects on the long-term economy of the area and its
adjacent commercial centers."
"There are more than 3,000 Wal-Marts but there is only one Hood River,"
noted Al Norman of the national organization Sprawl-Busters in a debate
with a Wal-Mart spokesperson held the Hood River Rotary Club. "Anyone
who reads the comprehensive plan for the county will realize this is a
bad fit, it just doesn’t make sense."
CRG has organized a letter-writing campaign and produced two posters
that focus on the supercenter's impact on quality of life and urge
adherence to the comprehensive plan. A public hearing on the development is
scheduled for July 31.
-- Hood River Citizens for Responsible Growth:
-- Sprawl-Busters: http://www.sprawl-busters.com
DENVER'S ASIAN BUSINESSES FORCE WAL-MART RETREAT
Strong protest from dozens of Asian small business owners has led
Wal-Mart to drop plans for a giant supercenter in west Denver.
Wal-Mart had been working with the Denver Urban Renewal Authority
(DURA) to condemn and bulldoze Alameda Square, a shopping center housing
some 25 Vietnamese, Cambodian, Laotian and Chinese businesses, including
the city's largest Asian grocery store. This spring, DURA declared the
center "blighted," the first step in evicting the businesses and
clearing the way for Wal-Mart. DURA also planned to provide Wal-Mart with $10
million in tax subsidies.
Alameda Square's small businesses, which have turned this once derelict
shopping strip into a thriving community center, mobilized after
learning of the plan in February. They hung signs in storefront windows
urging residents to contact the city, circulated a petition that gathered
more than 1,2000 signatures, and generated hundreds of letters to city
officials and local newspapers.
"The message the city sends to them and to all small business owners in
economically depressed areas is this: Don't risk your blood, sweat and
tears on trying to turn around a struggling area, because once you make
it a success, we will replace you with a national chain," wrote Douglas
Wal-Mart backed out in late June. City officials are now in talks with
property owner Khanh Vu, who wants to upgrade the buildings while
maintaining the center's existing merchants.
SMALL BUSINESSES FIGHT ABUSE OF EMINENT DOMAIN
Denver's Asian stores are not alone in facing condemnation for a
national chain. In a growing number of court cases around the country, small
business owners are challenging attempts by local and state governments
to seize their property for chain store development.
Traditionally, eminent domain---the power of government to take private
property for public use, provided that the owner receive market
value---has been used for schools, roads, and other public infrastructure. In
recent years, however, state and local governments have increasingly
used eminent domain to seize homes or small businesses for chain retail
In Pemberton, Pennsylvania, for example, officials want to seize an
obstetrician's office and a small clothing store to make way for a CVS
pharmacy. In Wheeling, West Virginia, city officials plan to condemn
several downtown buildings, oust the current businesses, and open dozens of
outlet stores in the same buildings. In New York, the state
redevelopment authority has moved to seize a 75-year-old Harlem woodworking shop
to create room for Home Depot and Costco.
The government officials behind these projects claim that economic
development is a "public use" that justifies seizing property.
"By that logic, anything goes," contends Scott Bullock, senior attorney
for the Institute for Justice, a libertarian public interest law firm
that is representing small businesses in several lawsuits challenging
the constitutionality of condemning property for private development.
"Any business will create more jobs and tax revenue than any home, and a
large business will create more than a small business. So there's no end
Bullock says the tide is beginning to shift; courts are increasingly
siding with small businesses and setting limits on the use of eminent
domain for private development.
In the New York case, Bill Minnich, owner of Minic Custom Woodwork,
lost in a federal district court on a procedural issue but has appealed
the decision. In California, a federal court concluded that the city of
Lancaster's attempt to seize a 99 Cent Store for a Costco expansion was
unconstitutional. The city has appealed. In Illinois, the state Supreme
Court recently blocked a state agency's attempt to seize property for a
race track expansion. That decision could derail another eminent domain
action initiated by the same agency for a Home Depot development.
Similar cases have been brought in Connecticut, Michigan, Minnesota,
and New Jersey.
-- See Institute for Justice at http://www.ij.org
and the Castle
Coalition at http://www.castlecoalition.org.
WAL-MART DECISION CHALLENGED IN NEW ORLEANS
Opponents of a massive Wal-Mart supercenter approved by the New Orleans
City Council in April are fighting the so-called "done deal" on several
A coalition of organizations has filed two lawsuits challenging the
decision. The plaintiffs include Smart Growth for Louisiana, the Coliseum
Square Association, the Louisiana Landmarks Society, the Historic
Magazine Row Association, and the Urban Conservancy.
One case in federal court charges that HUD's local agency, the Housing
Authority of New Orleans, failed to comply with regulations governing
the use of HOPE VI funds and violated the National Environmental Policy
Act and the National Historic Preservation Act.
A second suit in state court charges that the City Council violated its
own rules when it threw out 31 conditions for the project set by the
City Planning Commission and replaced them with provisions favored by
Wal-Mart without input from the public or the Planning Commission.
Meanwhile, opponents are organizing a letter-writing campaign to the
State Bond Commission, which must approve the creation of a special Tax
Increment Financing (TIF) district and issue $30 million in bonds for
the construction of the store. The financing essentially amounts to a 38
percent reduction in Wal-Mart's property tax bill, a subsidy opponents
say is unavailable to locally owned businesses and threatens the city's
The Urban Conservancy has also requested that Congressman William
Jefferson initiate a federal review of the project which is financed largely
by HOPE VI funds.
-- For the sordid history of this development, see the May issue of
this Bulletin at http://www.newrules.org/hta/hta0502.htm
-- For more on the recent developments, see the Urban Conservancy at
AT BORDERS, MEGA-PUBLISHERS GET THE KEYS TO THE KINGDOM
Leading publishers will be involved in determining which books are
carried at Borders Books stores under a new "category management" plan
being phased in this year.
Under the plan, Borders is assigning each of 250 book
categories---ranging from thrillers to romance novels---to one of the top publishers in
that category. Borders will provide this "category captain" with
detailed sales data for all titles in the category, including those of
competitors. The publisher will analyze this data alongside its own research
and prepare a plan outlining which titles should be stocked and how
those books should be displayed and promoted.
Three categories have already been assigned. HarperCollins, a division
of News Corp., will oversee the cooking and romance categories, while
Random House, a unit of Bertelsmann, will be responsible for young
children's books. Borders expects category captains to fork over about
$110,000, plus incur a variety of expenses associated with fulfilling their
Such a cozy relationship between large publishers and Borders, which
controls about one-quarter of all bookstore sales in the U.S., could
undermine competition and devastate small presses, contends Marilyn Ross,
executive director of the Small Publishers Association of North America
(SPAN). "Is anyone naive enough to believe these behemoths will make a
genuine effort to include the works of the little guys?" she asks.
As criticism mounts, Borders CEO Greg Josefowicz has tried to play down
the role of big publishers, noting that the "fundamental truth of
category management is that customers drive the process." He insists that
Borders will retain final say over which titles are stocked.
But experience in the supermarket industry, where category management
first took root in the mid-1990s, suggests that, in practice, final say
is rarely more than a rubber stamp. "In reality, the category captain
has a vast advantage in information," notes Albert Foer, president of
the American Antitrust Institute. "Even if the retailer occasionally
turns down or modifies the category captain's proposal, the odds are that
in general the category captain will prevail."
A Federal Trade Commission report released last year outlined several
potential antitrust problems with category captains, but the agency has
no plans for further research or action.
-- FTC report (see Part III):
-- SPAN: http://www.SPANnet.org
-- American Antitrust Institute: http://www.antitrustinstitute.org
MEXICO INVESTIGATES WAL-MART FOR ANTITRUST VIOLATIONS
In late May, Mexico's antitrust agency, the Federal Competition
Commission, opened an investigation into Wal-Mart for "monopolistic
practices." The action was prompted by charges that Wal-Mart has abused its
market power by pressuring suppliers to sell goods below cost or at prices
substantially lower than those available to other retailers (even after
accounting for reasonable volume discounts).
Wal-Mart is Mexico's largest retailer with 563 stores and $9.4 billion
in annual revenue, three times the size of its nearest rival. Wal-Mart
entered Mexico in 1997 when it purchased a controlling stake in Cifra
SA, then the country's largest retailer.
No timetable for the investigation has been announced.
Wal-Mart has been formally accused of antitrust violations on several
occasions. Last year, the Wisconsin Department of Agriculture, Trade,
and Consumer Protection charged the company with predatory pricing at
several of its stores in an attempt to put smaller competitors out of
business. Wal-Mart reached an agreement with the agency, but admitted no
wrongdoing. In 2000, German antitrust authorities charged Wal-Mart with
similar predatory tactics. The company is currently appealing the
charges through the German courts. A private antitrust lawsuit brought by a
small grocery store chain in Oklahoma is still pending.
-- Comision Federal de Competencia (Federal Competition Commission):
-- For more on the antitrust cases in Wisconsin, Germany, and Oklahoma,
see the November 2000 and October 2001 issues of this bulletin at
VIDEO STORE LAWSUIT DISMISSED
A federal judge has dismissed all charges in the antitrust case brought
by three independent video rental businesses against Blockbuster Video
and several major Hollywood studios. The defendants were charged with
price discrimination and conspiracy to prevent independent stores from
gaining access to the same revenue-sharing deals available to
In a move that surprised attorneys on both sides, the judge ruled that
there was insufficient evidence of conspiracy and a link between
discriminatory revenue-sharing deals and the demise of the independent
Two studios, Warner Bros. and Metro-Goldwyn-Mayer Inc., had already
reached a $15 million settlement with the plaintiffs.
Since the lawsuit was initiated three years ago, less expensive DVDs
have displaced VHS and given independents access to more equitable
-- For more on the ruling see
-- For more on revenue-sharing and background on the suit, see the
November 2000 issue of this bulletin at
The US Supreme Court's 6-3 decision in Tahoe-Sierra Preservation
Council v. Tahoe Regional Planning Agency, finding that a temporary
development moratorium enacted by a local government did not constitute a taking
of property requiring compensation, has renewed interest in moratoria
as planning tools. Several communities have used moratoria to suspend
retail development while evaluating the impacts of superstores and
revising local zoning rules accordingly. We've added information, links, and
ordinance examples to the New Rules web site at
COMMUNITY & ENVIRONMENTAL DEFENSE SERVICES
Community & Environmental Defense Services (CEDS) works with citizens
to defend their communities from bad development, including shopping
centers, highways, landfills, mines, and golf courses. CEDS helps citizens
identify and document the impacts of a proposed development and craft a
strategy to block the project or mitigate its impacts. CEDS can assist
with everything from attracting volunteers to raising funds and finding
experts to testify. CEDS offers free advice and free publications. Many
communities find that these free services are all they need; others
hire the organization to carry out their campaigns.
-- Be sure to check out CEDS free publications, starting with
"Preserving Neighborhoods and the Environment from Unsustainable Land
Development Projects: A Citizen's Guide to Forming a Winning Strategy," at
BIG BOXES: UNWISE INVESTMENTS
PricewaterhouseCoopers and Lend Lease Real Estate Investments Inc. have
released their annual guide for real estate investors. For several
years, the guide has advised investors to shun big box retail. "Emerging
Trends in Real Estate 2002" continues this advice. "America is
overstored---too many formats cannibalize each other," the report notes. "Dead
and dying malls litter the nation's suburbs. . . Most power centers
[i.e., big box developments] are risky propositions. . . The only sure thing
is that owners will be challenged to re-lease empty boxes abandoned by
the losers. . . It's just more of the same retailer merry-go-round: rob
Peter to pay Paul."
For failing malls and shopping strips, there are "no exit strategies."
The same might be said for communities that hitch their futures to
absentee-owned sprawl. The report says traditional small-scale, mixed-use
neighborhoods are the way to go: "[Investors] have come to realize that
properties in better-planned, growth-constrained markets hold value
better in downmarkets and appreciate more in upcycles. Areas with sensible
zoning (integrating commercial, retail, and residential), parks, and
street grids with sidewalks will age better than places oriented to
disconnected cul-de-sac subdivisions and shopping strips, navigable only by
-- Emerging Trends in Real Estate 2002: http://www.lendleaserei.com.
CORPORATE CHAINS AT THE PUBLIC TROUGH
Despite evidence that chain stores harm local economies and destroy
about as many jobs as they create, local and state officials continue to
give these companies substantial tax breaks and subsidies. Although no
one knows how much public funding the major retailers have received,
these subsidies are widespread and have created an unlevel playing field
for locally owned businesses which rarely receive any kind of tax break
or subsidy. The following are just a few of many recent examples culled
from the past two months:
* Austin officials are considering a $2.1 million tax break for a
development anchored by Borders Books & Music. The development is just
blocks from two of the city's biggest and best---and
unsubsidized---independent retailers, Book People and Waterloo Records.
* Chicago plans to provide a $5.5 million tax subsidy for a
development that includes a Borders Books and Music.
* Home Depot has applied for $300,000 in state tax breaks for a new
superstore in Denham Springs, Louisiana.
* Palm Beach County, Florida, gave preliminary approval for $1.1
million tax break for Walgreens.
* Ohio provided $10 million in incentives for three new Wal-Mart
facilities. The nonprofit Policy Matters Ohio has criticized the deals in a
new report available on line at
ELSEWHERE IN THE MEDIA
Sales Tax Fairness:
-- "The Untaxables: Before Congress revisits the Internet-sales issue,
states are developing a simpler and more uniform tax-collection
process," an update on the Streamlined Sales Tax Project from the July 2002
issue of Governing: http://www.governing.com/7tax.htm.
Wal-Mart's Labor Practices:
-- "Suits Say Wal-Mart Forces Workers to Toil Off the Clock" by Steven
Greenhouse, New York Times, June 25, 2002:
-- "Union Blues at Wal-Mart" by John Dicker in the June 28, 2002 issue
of The Nation: http://www.alternet.org/story.html?StoryID=13490.
-- "How Wal-Mart is Remaking our World," by Jim Hightower, Hightower
Lowdown, April 26, 2002: http://www.alternet.org/story.html?StoryID=12962
Copyright 2002 by the Institute for Local Self-Reliance.
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the Institute for Local Self-Reliance, 1313 5th Street SE, Minneapolis
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