Echoes Dispatches From Economic History
A History of Chain Stores, and Their Enemies: Echoes
Protest movements against big business and distant power are a recurrent theme in U.S. history. The Occupy Wall Street protesters who spent two months camped out in lower Manhattan have forerunners dating back to the Revolution. Many were fleeting; like Occupy Wall Street and its progeny around the country, they called attention to economic wrongs, but offered no formulas to right them. One of these protest movements, however, was long lasting and highly successful.
Its objective? Restraining the power of chain stores.
The anti-chain-store movement is an all-but-forgotten piece of U.S. history. On Black Friday, when shoppers who disdain Wal-Mart are likely to be spending their money at Target or BestBuy without complaint, the idea of a world without chains seems quaint. But in the first half of the 20th century, no social movement resonated more widely. The foes of chain stores had no single leader, no board of directors, no headquarters. What they did have was remarkable staying power.
Chain stores were almost unknown before the start of the 20th century. As entrepreneurs began assembling grocery chains in New York, Philadelphia and other northeastern cities, objections arose almost immediately. In 1903, the National Association of Retail Grocers debated whether it was fair for manufacturers to give chain retailers the same volume discounts it gave wholesalers. Five years later, grocery wholesalers in Boston petitioned Congress to allow manufacturers to fix retail prices to help grocers "preserve their commercial existence in the face of the efforts of powerful and selfish monopolies to gradually eliminate the individual dealer."
The issue in those days was framed as price discrimination. A grocer with a hundred stores could buy goods more cheaply than a grocer with one store, and small merchants and their wholesale suppliers found this unfair. When he ran for president in 1912, Woodrow Wilson campaigned against price discrimination with the backing of one of the country's most prominent lawyers, Louis D. Brandeis. "The evil results of price-cutting are far-reaching," Brandeis asserted in Harper's Weekly, arguing that manufacturers should be able to set the retail prices of their products and to prohibit stores from charging less.
The early anti-chain movement was concentrated mainly in the Northeast, where most chains were located. But by the mid-1920s, chain stores had reached across the country. State and local governments imposed taxes based on the number of stores owned by a single retailer, a formula upheld by the U.S. Supreme Court in 1931. Local chambers of commerce mounted campaigns urging housewives not to shop at the "foreign chains" that were allegedly sucking the life out of small towns. Most states enacted "fair trade" laws that barred such nefarious practices as two-for-the-price-of-one sales.
President Franklin D. Roosevelt, who portrayed himself as the consumer's friend, turned restrictions on chains into national policy. Under the National Industrial Recovery Act of 1933, one of Roosevelt's programs to revive the economy, federally mandated codes were instituted that limited store hours, and regulated wages and prices -- but the restrictions applied only to chains and large stores, not to mom-and-pop merchants. When those codes were invalidated by the Supreme Court, Congress enacted another law, the Robinson-Patman Act of 1936, intended to make most volume discounts illegal so that small shopkeepers could buy their goods for the same prices as giant chains.
In 1946, the government won criminal convictions against executives of the largest chain of all, the Great Atlantic & Pacific Tea Company (A&P), on the bizarre charge that they were violating antitrust law by selling groceries too cheaply. As late as 1953, the government was trying to break A&P apart by claiming that baking its own bread and canning its own vegetables gave the company an unfair advantage.
What gave the leaderless anti-chain movement such staying power? The answer, I think, is that it had a simple, clear objective: keeping small merchants in business. In that respect, the movement was remarkably successful. In 1929, the first time the government took a count, 1.4 million Americans were storekeepers. By 1948, that number topped 1.7 million. Over the same period, the number of wholesalers selling to retail stores almost doubled. Only in the 1950s, as shoppers learned the joys of discount retailing, did the anti-chain movement start to fade away. Still, anti-chain forces successfully used the fear of big corporations to preserve hundreds of thousands of small businesses long after market forces would have extinguished them. Occupy Wall Street will be hard-pressed to accomplish half as much.
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