business news in context, analysis with attitude

Our lead story last Friday was about how two separate organizations, the Small Business Survival Committee (SBSC) and the National Taxpayers Union (NTU), were expressing disappointment in the fact that a federal judge Tuesday refused to dismiss an antitrust case against MasterCard and Visa USA that has been brought by 4 million merchants, including Wal-Mart. They argued that the antitrust suit was both anti-consumer and anti-small business…which we said confused us, since our impression was that Visa’s and MasterCard’s debit card policies raised prices to both retailers and consumers.

MNB user Roxanne Diaz wrote:

“You’re not as confused as you think... about the objections to Wal Mart's class action suit against The Associations. Your observations are accurate and leave me wondering, do these organizations who claim to represent the interests of consumers and small businesses really understand the evolving landscape of PIN based debit?

“The main objection of Wal-Mart's claim, as I understand it, is that Visa and MasterCard are using their existing (credit card) relationship with merchants to enforce a rule which requires merchants to accept all cards branded Visa or MC. This rule doesn't distinguish between credit cards and debit cards so it is applied to both. And here in lies the problem... Visa's debit network, Interlink, has been increasing fees faster than merchants (and processors) can keep up with.

“So, as you gathered, by virtue of its sheer massive reach into the marketplace, Visa is able to force merchants to pay fees for debit cards well above what most of the debit networks charge. (Some debit networks saw the opportunity to jump on the Interlink bandwagon and raise their fees as well, but most have maintained substantially lower fee structures.) Last time I checked, this was text book anti-trust.

“Like I said, I don't think you're confused. (At least not about this!)”

And MNB user Mack McLamb added:

“I am also confused by the argument. The higher fees that we as retailers pay for the debit cards from MasterCard and Visa do not benefit the customer in any way that I can think of. In fact because of the higher costs associated with taking these debit cards, these fees ultimately end up costing the consumer money as the costs are passed on. We operate a small group of grocery stores in NC and its costs almost 3 times as much to take a debit card for MasterCard/Visa that the other traditional ATM cards from the other networks. As best I can tell the additional fees do not benefit the customer in any way.”

Reaction to Friday’s story about how the war in Iraq has affected various Wal-Marts around the country that are located near military bases, and how Wal-Mart is showing compassion for both its employees and customers affected by the conflict and its repercussions.

One MNB user wrote:

“When we talk of Wal-Mart's expansion, it is often mentioned that they have great logistics, economies of scale and information systems. What is often overlooked is their unbelievable HR system that allow them to build and sustain a cohesive and increasingly global network of colleagues that still feel they are part of a team that shares their local concerns. I would love to see more insight into the way they have built and continue to maintain this advantage in the market.”

Another MNB user wrote:

“This isn't anything new for Wal-Mart. The company regularly runs dedicated promotions and events around Veterans Day and Memorial Day. In fact, the chain once teamed with Kodak and American Greetings in 2000 to place a similar Wall of Heroes for local vets in hundreds of stores; giant "thank you" cards were signed by customers and delivered to local VA hospitals. That was in 2000, when there was no impending war and well before patriotism re-entered the Zeitgeist.

“Now, you can call that crass opportunism if you'd like (and it very well might be), but it once again shows that Wal-Mart knows how its customers think.”


However, one MNB user refused to swayed by what we perceived as Wal-Mart’s level of compassion:

“Too bad Wal-Mart can't take care of their employees with the same compassion. They hire more people than the government, because most of them are part time, so they don't have to pay health benefits. How many of their employees don't get paid for overtime? They had to sue for being forced to work overtime without pay. I've only been in a Wal-Mart store a couple of times and have no desire to go back. The cosmetic section was definitely lacking and I couldn't find what I was looking for elsewhere. Wal-Mart seems to carry a lot of items, but very limited to selection.”

That final sentence is sort of interesting, because we got an unrelated email last week that made the following observation:

”Wal-Mart’s out-of-stocks appear to be increasing. Wal-Mart is now telling vendors that gross margin, and not sales, is the game. It appears that Lee (Scott) is nor Sam (Walton) or David (Glass).”

In a related commentary last Friday, we wrote: “Look at the stories that dominate MNB almost every day. Ahold’s US Foodservice debacle. Fleming’s bankruptcy. Kmart’s ongoing nightmare. Are these stories about companies that have put the consumer first, that have really focused on being shopkeepers or helping shopkeepers cater to the shopper?”

MNB user Richard Lowe responded:

“We want more stories about those that are doing positive things for the consumers!”

When companies stop doing dumb things that result in lawsuits, regulatory investigations, and consumer mistrust, we’ll turn our attention to so-called “good news.”

We promise.

We reported on Friday that a number of produce and packaged goods vendors are saying that Fleming owes them as much as $100 million – and that the bankrupt wholesaler cannot use that money for any purpose other than paying them because the Perishable Agricultural Commodities Act (PACA) of 1930 says the funds are to be held in trust. Our commentary said that “you have to admire the kind of initiative it takes to reach back to the Depression to find a law that says a bankrupt company has to pay off existing bills before it starts using any money it has to generate new funding.”

Inadvertently, we betrayed our lack of law degree, as was pointed out by several members of the MNB community. One typical response:

“Yes, the PACA law has been on the books since 1930, but using that law is not a reach back into history. The use of this law is very current and settlements are awarded by courts on a regular basis under this law. That
aw was written to protect produce companies who sell a perishable product. Protection is needed because the product does not stand around for a month in a cooler without becoming garbage. Fleming has purchased other products that are not perishable. If money is owed, a company's products may be reclaimed. There is no opportunity for that with fresh produce. By the time any dispute is settled, most of the product is useless if not sold for consumption. What the PACA does is make it possible for produce creditors to get their share first. Many times produce creditors must settle for cents on the dollar even invoking the PACA.”

Thanks for the illumination, folks.

We had a story the other day about a piece that ran in the Baltimore Sun detailing how supermarkets are getting into nonfood items so they can compete better against discounters and supercenters, and subsequently posted an email that questioned the logic of such a move, suggesting that “supermarkets would be far better off by improving their line of perishable goods than to try to compete with retailers by stocking the over-run or discontinued items.”

One MNB user got in on the discussion:

“Regarding the strategy of carrying non-traditional items on a limited-time basis, it's interesting to note that the most successful retailers in the last five years are "Dollar Stores," which thrive on a similar marketing approach…

GM products are a growing trend with supermarkets because our customers are asking for these types of products. Convenience is our strength and the consumer is voting by buying GM products at an increasing rate.”
KC's View: