Wal-Mart Girds for Showdown With New Congress on Unions, Trade

By Kim Chipman and Lauren Coleman-Lochner

Dec. 4 (Bloomberg) -- Wal-Mart Stores Inc., long an ally of Republicans, has spent the last two years ramping up political donations to Democrats. The company will soon find out whether that bet will pay off.

The world's largest retailer will contend next year with a Democratic-led Congress with close ties to organized labor. Democratic leaders say one of their priorities is a bill opposed by Wal-Mart making it easier for workers at the non-union company to organize. Lawmakers may also block Wal-Mart's plans to operate a bank and thwart trade deals that allow the company to import goods at low prices.

Bentonville, Arkansas-based Wal-Mart says it wants to persuade lawmakers that criticism of its labor practices is unwarranted and that free trade helps consumers. The company has enlisted at least one Democratic ally, Senator Blanche Lincoln of Arkansas, and has given money to the Congressional Black Caucus, a group of 43 Democratic lawmakers.

``We're optimistic,'' says Lee Culpepper, who heads lobbying efforts in Washington for Wal-Mart. ``Our opportunity to build relationships will probably lead to an increase'' in donations to Democrats.

Wal-Mart has one of the nation's biggest corporate political-action committees, giving $1.2 million to federal candidates for the 2006 elections. While only 32 percent went to Democrats, that was up from 1.7 percent 10 years ago, according to PoliticalMoneyLine, a Washington-based company that tracks money in politics.

``One of the things we decided to do at the beginning of 2005 was to try to do a better job building relationships and political support on both sides of the aisle, but in particular with Democrats,'' Culpepper says.

Arkansas Ally

In the Senate, Lincoln is considered Wal-Mart's strongest Democratic advocate. Over the last decade, she received almost $100,000 in campaign cash from Wal-Mart, its executives and the heirs of company founder Sam Walton, according to Federal Election Commission data. Lincoln has supported the company's efforts to suspend tariffs on imported goods sold at Wal-Mart's U.S. stores.

Wal-Mart is the ``largest employer in my home state,'' Lincoln said in a statement. ``I know they understand their responsibility as an industry leader to set a higher standard with regard to employee and customer benefits, corporate citizenship and community involvement.''

Wal-Mart's attempts to woo members of the Congressional Black Caucus include endowing a $1 million scholarship grant administered by the group. Last year, eight members of the caucus who received contributions from Wal-Mart voted against a measure that would have ended the Labor Department's policy of giving the company notice before starting any investigations of alleged wage-and-hour violations. The measure was defeated.

Black Caucus

Members of the caucus, including Representatives Bennie Thompson of Mississippi and Al Wynn of Maryland, didn't return calls seeking comment.

Wal-Mart's efforts to reach out to more Democrats may not be enough to soften the anti-Wal-Mart stance of critics such as Representative George Miller of California and Senator Edward Kennedy of Massachusetts, who will head panels overseeing labor issues. Both have said they will try to pass the Employee Free Choice Act, which would force companies to recognize unions when employees sign a card expressing their desire to organize.

Wal-Mart, which has fought prior attempts to unionize its U.S. workers, says it would oppose such a bill.

Investigations

The company also may be subject to investigations of its labor practices by the labor panels, which have the power to subpoena executives, says Andy Laperriere, political economist at International Strategy & Investment, a Wall Street advisory firm.

``Wal-Mart may get the tobacco-industry treatment from this new Congress,'' Laperriere says. The company may also face opposition from newly elected lawmakers who benefited from union support in their campaigns.

Democratic Senator-elect James Webb of Virginia says Wal- Mart is a symptom of the failure of U.S. trade policy, which penalizes American workers and industries by flooding the market with cheap imports and making it too easy for companies to export jobs overseas.

Webb and other Democratic lawmakers who seek stricter labor provisions in trade deals may hurt Wal-Mart's ability to get trade-related concessions that help the company curb costs.

`Difficult'

``Trade might be more difficult'' with the new Congress, Culpepper says.

Democrats such as Kennedy say voter concerns about job security, flat wage growth and a widening gap between rich and poor were part of the reason Democrats were able to sweep both chambers of Congress for the first time in 14 years in last month's elections.

``Wal-Mart already is in the crosshairs of a lot of Democratic gunslingers these days, and we can expect a lot more rhetoric about the company being irresponsible,'' says Robert Reich, secretary of labor under former President Bill Clinton.

For now, Wal-Mart, the country's largest private employer, says it supports one of the Democrats' top priorities -- raising the national minimum wage of $5.15 an hour for the first time in almost 10 years. Chief Executive Officer H. Lee Scott has said an increase would be good for his customers.

Democratic leaders have said they will try to pass a minimum-wage measure in the first 100 hours of the new session in January.

Banking Application

One of the company's first congressional fights may center on its application with the Federal Deposit Insurance Corp. to own an industrial bank.

Representative Barney Frank, the Massachusetts Democrat who is in line to become chairman of the House Financial Services Committee, has said he opposes allowing commercial companies such as Wal-Mart to own industrial banks, which offer services such as processing credit-card transactions.

``There's a sense that when they do expand into a field, they start a race to the bottom,'' Frank said in an interview earlier this year.

Culpepper says he expects the FDIC to announce a decision in January and won't comment until then. The company says it wants to own a bank so it can save on the fees it pays third parties to process transactions.

The 2008 presidential race may bring new headaches for the company. So far, at least two Democrats considering White House runs, Senator Barack Obama of Illinois and former Senator John Edwards of North Carolina, have criticized the company's wages and health-care benefits.

`Vital' Battle

``The battle to engage Wal-Mart'' is ``absolutely vital,'' Obama said on a Nov. 15 conference call hosted by Wake-Up Wal- Mart, a Washington-based group funded by labor organizations. Culpepper says he met with Obama before the call, though he declined to comment on what was said. Obama spokesman Tommy Vietor says the company tried to persuade the senator that his views about the company were misguided.

Edwards last week refused to hold a book signing at a Wal- Mart in Manchester, New Hampshire, choosing a nearby Barnes & Noble instead -- even though the book store pays its employees $7 an hour to start, less than the $7.50 an hour paid by Wal-Mart, according to the Manchester Union Leader newspaper.

``Democrats running for president are lining up to bash Wal- Mart because they want the support of the unions,'' Laperriere says.

To contact the reporters on this story: Kim Chipman in Washington at kchipman@bloomberg.net ; Lauren Coleman-Lochner in New York at llochner@bloomberg.net .

Last Updated: December 3, 2006 19:03 EST

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