• U.S.

TRADE: Colorado No

5 minute read
TIME

U. S. Business as a whole found last week’s election thoroughly satisfactory. But for one major U. S. business it was profoundly disappointing —in Colorado the chain stores lost their second major battle with the tax ogre. First such battle was over the proposed California chain-store tax in 1936, which the chains defeated by a mighty publicity and advertising campaign. Colorado has had a chain-store tax since 1934 and last week it came up for referendum. Despite another mighty publicity and advertising barrage, Colorado voted No to repeal by 230,000 to 160,000.

As State chain-store taxes go Colorado’s is mild, since it is graduated from $2 for the first store up to $300 for each store over 24. But it is the only State chain-store tax actually voted into existence. Similar taxes in 21 other States were all enacted by legislatures inspired by particular groups.

For this reason, more than because of the $200,000 a year it costs them, the chains were especially anxious to win. They imported lanky young Theodore W. Braun. whose Braun & Co. worked with Lord & Thomas in managing the California battle.

Ted Braun put on a good show—radio programs, contests, personal conciliation of Colorado farmers, etc. He was handicapped by the fact that Colorado voters were overwhelmingly primed to vote No to most of the other referendum questions on the ballot.

Colorado’s chain-store tax decision is of national importance because awaiting the new Congress is Representative Wright Patman’s bill admittedly designed to tax interstate chains out of existence. Proposed at the last session but not voted on, the Patman bill would tax stores on a graduated scale to a maximum of $1,000 times the number of stores times the number of States. For the Great Atlantic & Pacific Tea Co.’s 11,752 stores this tax would be $458,328,000, more than half A. & P.’s 1937 gross sales. Melville Shoe Corp.’s 674 stores would have to pay $18,580,000. Woolworth’s 1,859 stores $91,091,000. J. C. Penney’s 1,540 stores $73,920.000.

Time was when a proposal like that would only have made the chains laugh. But Wright Patman has already put over the Robinson-Patman Act limiting rebate and other chain-store practices. And the steady increase in State chain-store taxes has assumed the shape of a national trend. Two months ago, therefore, A. & P., bull’s-eye of Wright Patman’s attack, broke its 79-year policy of silence on “public and private questions” with a “Statement of Public Policy” advertised in 1,300 newspapers over the signatures of Brothers George L. and John A. Hartford.

Chairman and president respectively of the world’s greatest retail distribution organization, the Brothers Hartford have each spent more than 50 years in the grocery business and can justly claim to know more about it than anybody else. But since they had never before been noted for knowledge of public relations, U. S. Business was dumfounded when the two crusty capitalists not only laid their cards on the table with effective dignity but set something of a precedent by openly announcing that, since they knew nothing much about public relations, they had hired someone who did—Publicist Carl Byoir.

The case against the chains rests on the familiar charges that they tend to drive independents out of business, force farm ers to take lower prices for their goods, foster monopoly, and bleed the communi ties where their stores are located in favor of absentee owners. To these assertions the chains have answers authenticated by impartial groups ranging from The Harvard Bureau of Research to the Federal Trade Commission.

Samples: Far from being forced out of business, independent food stores in creased from 234,000 to 304,000 between 1929 and 1935 while the number of chain stores decreased 8.3%. In A. & P.’s case there is a profit of between one and three per cent which it takes away from communities; however, it sells its foods at from eight to ten per cent under independent competitors, hence gives the community a net saving of from five to nine per cent.

Having made such points as these the chains claim that the real reason behind Wright Patman’s proposal is the bitter hatred which chain-store efficiency breeds in competitive wholesalers and independents. This efficiency rests upon two prime pegs — ability to buy in huge quantities and elimination of numerous wholesale and other middleman functions which add markups to food costs. Such benefits can be obtained by independents through use of supermarkets or of voluntary chains.

In any case, say the chains, any process that gets food to people at cheaper prices means not that higher-priced independents lose business but that more food is consumed, since the average housewife with a limited food budget will spend just so much regardless of prices. Increased sales volume, say the chains, means that crop surpluses threaten less frequently and can be disposed of when they arise, thus stabilizing farm prices.

Spouting such claims in a rival blare of oratory is not the only string to the chains’ bow. A. & P. pays an average of $30 a week to managers and clerks, compared to the Department of Labor’s figure of $22 for all retail stores. In their Public Statement in September the Brothers Hartford declared that passage of the Patman bill would put 1,000,000 men out of work. Meanwhile, with little fanfare, A. & P. agreed to place all its outside printing contracts in union shops. Promptly the A. F. of L. announced that it was against chain-store taxes.

More Must-Reads from TIME

Contact us at letters@time.com