Criticism of Wal-Mart

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Bumper sticker critical of Wal-Mart produced by ReclaimDemocracy.org
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It has been suggested that Wal-Mart employee and labor relations be merged into this article or section. (Discuss)

Several groups have criticised Wal-Mart's policies and/or business practices, including community groups, grassroots organizations, labor unions,[1] religious organizations,[2][3] and environmental groups. In particular, several labor unions have specific concerns regarding the company's anti-union stance, as well as several employee relations issues. Other areas of concern include the corporation's extensive foreign product sourcing, treatment of employees and product suppliers, environmental practices, the use of public subsidies, and the impact of stores on the local economies of towns in which they operate.[4][5][6]

In 2005, several organizations were created by labor unions to confront these issues, including Wake Up Wal-Mart (United Food and Commercial Workers) and Wal-Mart Watch (Service Employees International Union). By the end of 2005, Wal-Mart launched, Working Families for Wal-Mart, to counter the criticisms of the other two groups. Additional efforts to counter many criticisms include launching a public relations campaign in 2005 through their public relations website,[7] as well as several television commercials. The company also retained the public relations firm Edelman to respond to negative media attention,[8] and has started looking beyond mainstream media and interacting directly with bloggers, by directly sending them news, suggesting topics for postings, and even inviting them to visit their corporate headquarters.[9] In August 2006, the company initiated a voter education program by sending a letter to its 18,000 Iowa associates regarding the decision of a few elected leaders and candidates for office to attack the company at union-funded publicity events in the state.[10] They also plan to send similar letters to associates in other key states, including South Carolina, New Hampshire, and Nevada, as well as to invite various candidates to tour their stores and meet associates.

Several independent critics have suggested that Wal-Mart is a success in the system of free enterprise because it sells products at low prices that people want to buy, satisfying customer's needs, but at the same time their lower prices draw customers away from established business, "hurting the community."[11][12] Others argue that Wal-Mart is attacked simply because it is a, "leader of the Fortune 500 list," "the largest employer in America," and a, "free-market success story."[13]

Contents

[edit] Local Communities

[edit] Store openings

Wal-Mart opened their Teotihuacán Superstore 1.9 miles from the Pyramid of the Moon (shown) amid community protests.
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Wal-Mart opened their Teotihuacán Superstore 1.9 miles from the Pyramid of the Moon (shown) amid community protests.

When planning new store locations, Wal-Mart often faces many concerns from the affected communities. Local critics that oppose new Wal-Mart store openings cite concerns such as traffic problems, environment problems, public safety, absentee landlordism, bad public relations,[14][15] low wages and benefits, and predatory pricing.[16][17][18] Critics that defend Wal-Mart cite consumer choice, economic studies,[19] as well as the underlying political response. Opposition may include rejections for developer applications from city councils as well as protest marches formed by activists, unions, and even religious groups.[20][21][22] In some instances, activists have demonstrated opposition by causing property damage to store buildings or by creating bomb scares.[23][24]

One such criticized store location was a Wal-Mart Superstore that opened in 2004 in Mexico, 1.9 miles away from the historic Teotihuacán Pyramid of the Moon and archaeological excavation site.[25] During construction, a 3 foot square ancient altar was uncovered 1 foot beneath the grade of where the store's parking lot is now located.[25] The store proposal received much international media attention. Critics that opposed the Wal-Mart store opening included the local community resistance, as well as environmental groups and anti-globalist policy groups, which protested the store opening.[26] Homero Aridjis, one of the store's lead opponents in the community characterized the opening as being, "supremely symbolic", and, "...like planting the staff of globalization in the heart of ancient Mexico."[27] Other critics compared the store opening to Hernan Cortés and the Spanish conquest of Mexico. Wal-Mart stated that they, "are not building 'next to' the pyramids at Teotihuacán, but miles away. ... Our construction is in an area designated for commercial buildings and residences, and hundreds are currently located there. The only opposition to our store has come from a small group of merchants who find competition unwelcome and are seeking to misrepresent our plans for their own interests."[citation needed] The Wal-Mart location was supported by Mexico's national anthropology institute, the United Nations and the Paris-based International Council on Monuments and Sites.[28]

[edit] Economic impact

This Bizarro comic is an example of the commonly cited criticism that Wal-Mart forces smaller, locally-owned stores out of business.
This Bizarro comic is an example of the commonly cited criticism that Wal-Mart forces smaller, locally-owned stores out of business.

As one of the largest corporations in the world, the presence of Wal-Mart in local communities has a significant impact on the local economies in which it operates. Studies on the economic impact of Wal-Mart indicate that there are both positive and negative effects that arise from the presence of a store. For example, a study at Iowa State University in 1997 found that small towns can lose almost half of their retail trade within ten years of Wal-Mart opening.[29] A subsequent study in collaboration with Mississippi State University indicated that there are, "both positive and negative impacts on existing stores in the area where the new supercenter locates."[30] A June 2006 article published by the Ludwig von Mises Institute suggests that the economic effects of Wal-Mart are overwhelmingly positive, and that all of the fundamental complaints of Wal-Mart's critics are based on profound ignorance of Wal-Mart's actual economic significance.[31] Wal-Mart's low prices cause some existing businesses to close, yet also creates new opportunities for other small business and that, as a result, "the process of creative destruction unleashed by Wal-Mart has no statistically significant impact on the overall size of the small business sector in the United States."[19]

A study commissioned by Wal-Mart by Global Insight, claimed that their stores' presence saves working families more than $2,329 per year, while creating more than 210,000 part time, minimum wage jobs in the U.S.[32][33] From 1985–2004, Wal-Mart was found to be, "associated with a cumulative decline of 9.1% in food-at-home prices, a 4.2% decline in commodities (goods) prices, and a 3.1% decline in overall consumer prices."[34] The study also indicated that, "nominal wages are 2.2% lower, but given that consumer prices are 3.1% lower, real disposable income is 0.9% higher than it would have been in a world without Wal-Mart."[34]

Another study at the University of Missouri further examined Wal-Mart's specific impact on local employment, which found that an individual store's entry into a county increased net retail employment in that county by 100 jobs in the short term, with half of this increase disappearing as other retail establishments close or reduce employment over a five-year period, while still producing net gain of 50 jobs.[35] Furthermore, Wal-Mart's low prices provide for an increase in real income. For example, one study has shown that Wal-Mart's discounting on food alone boosts the welfare of shoppers by at least $50 billion per year.[36] A study in 2005 at MIT that measured the effect on consumer welfare found that the poorest segment of the population benefits the most from the existence of discount retailers.[37]

However, while Wal-Mart is providing jobs for more people and their low prices are providing advantages in the marketplace, their low wages are also increasing the burden on taxpayers. For example, a 2002 survey by the state of Georgia's subsidized healthcare system, PeachCare, found that Wal-Mart was the largest private employer of the parents of children enrolled in its program, and also found that one quarter of the employees at Georgia Wal-Marts qualified to enroll their children in Medicaid.[38]A 2004 study at the University of California, Berkeley further asserted that Wal-Mart's low wages and benefits resulted in an increased burden on the social safety net, costing California taxpayers $86 million.[39][40] A Pennsylvania State University study, also in 2004, showed that U.S. counties with more Wal-Mart stores showed evidence of increasing rates of poverty relative to those with fewer stores.[41] This could be due to the displacement of workers from higher-paid jobs in the retailers that are driven out of business, Wal-Mart providing lower levels of local philanthropy than the replaced businesses, or a shrinking pool of local leadership and reduced social capital due to a reduced number of local independent businesses.[41]

[edit] Corporate welfare

Some U.S. critics also point to more than $1 billion in taxpayer-supported developmental incentives that Wal-Mart has received in the U.S.[42] Such development incentives have been termed by critics as, "Corporate welfare", a pejorative term describing a government's bestowal of grants and/or tax breaks on corporations or other, "special favorable treatment" from the government.[43]

[edit] Predatory pricing and supplier issues

Wal-Mart has faced several accusations of, "predatory pricing", or intentionally selling a product below cost in order to drive some or all competitors out of the market. In 1995, in the case of Wal-Mart Stores, Inc. v. American Drugs, Inc., American Drugs accused Wal-Mart of intentionally selling individual items below cost for the purpose of injuring competitors and destroying competition. While the lower court ruled in favor of American Drug, the Supreme Court of Arkansas ruled in favor of Wal-Mart, citing that their pricing strategies, including the use of loss leaders, did not constitute predatory pricing.[16] In 2000, the Wisconsin Department of Agriculture, Trade, and Consumer Protection accused Wal-Mart of selling butter, milk, laundry detergent, and other staple goods below cost, with the intention of forcing competitors out of business and gaining a monopoly in local markets.[44] Crest Foods filed a similar lawsuit in Oklahoma, accusing the company of predatory pricing on several of its products, in an effort to drive their own company-owned store in Edmond, Oklahoma out of business.[45] Both cases were settled out of court, with no fine and no admission of wrongdoing. There was a stipulation in the Wisconsin case, however, that Wal-Mart would face double or triple fines for any future violations.[44]

In 2003, Mexico's antitrust agency, the Federal Competition Commission, investigated Wal-Mart for, "monopolistic practices", prompted by various charges that the retailer has abused its market power by pressuring suppliers to sell goods below cost or at prices significantly less than those available to other stores.[46] Later, in 2003, the German High Court ruled that Wal-Mart's below cost pricing strategy undermined competition and violated the country's antitrust laws.[18]

Wal-Mart has also been accused of using monopsony power to force suppliers into self-defeating practices. For example, Barry C. Lynn, a senior fellow at the New America Foundation, argues that Wal-Mart's constant demand for lower prices caused Kraft Foods to "shut down thirty-nine plants, to let go [of] 13,500 workers, and to eliminate a quarter of its products." Kraft's cost of production had gone up due to higher energy and raw material costs. Lynn argues that in a free market (referring to a non-monopsony market, as opposed to the general economic definition of a free market), Kraft could have passed those costs on to its distributors and ultimately consumers.[47]

[edit] Employee and labor relations

See also: Wal-Mart employee and labor relations

Wal-Mart has been criticized for their policies against labor unions. In North America, the company has largely thwarted unionization by its employees with aggressive anti-union tactics. For example, when meat cutters at the Jacksonville, Texas supercenter voted to unionize in 2000, Wal-Mart closed its meat department and began shipping in pre-packaged meats at all stores.[48] When workers at a Jonquière, Quebec Wal-Mart voted to unionize, Wal-Mart closed the store five months later, citing weak profits.[49] Another store, in Saint-Hyacinthe, Quebec, voted to unionize and Wal-Mart lost a court challenge to the certification process in April, 2006.[50] In Germany, the ver.di union reports that it has organized every local Wal-Mart SuperCenter, but it complains that Wal-Mart ignores German co-determination rules and does not adequately inform ver.di about store closings.[51] Company officials say they comply with labor laws. In July 2003, employees affiliated with the ver.di union staged a brief strike.[52]

On July 29, 2006, 30 Wal-Mart employees in the southeast province of Fujian decided to form a local union, affiliated with the All-China Federation of Trade Unions (ACFTU), the country's only legal trade union.[53]

In the United States, there are concerns on several labor issues, including low pay and inadequate health care coverage. Additionally, Wal-Mart is facing several lawsuits by current and former hourly associates who allege that the company forced them to work, "off the clock", or failed to provide work breaks, or otherwise claim they were not paid for work performed."[54]

[edit] Imports and globalization

As the single largest customer to most of its vendors, Wal-Mart openly uses its bargaining power to negotiate lower prices from vendors. Specifically, in its negotiations with suppliers, Wal-Mart requires that prices go down from year to year.[55] If a vendor does not comply with Wal-Mart's request for reduced prices, they risk having their entire brand removed from Wal-Mart's shelves in favor of a lower-priced competitor or a less expensive store brand.[56] Critics argue that this pressures vendors to shift manufacturing jobs to China and other third world nations, where the cost of labor is less expensive.

In the mid-1990s, Wal-Mart had a "Buy American", campaign, which was eventually cancelled. By 2005, about 60% of Wal-Mart's merchandise was imported, compared to 6% in 1995.[56] In 2004, Wal-Mart spent $18 billion on Chinese products alone, and if it were an individual economy, the company would rank as China's eighth largest trading partner, ahead of Russia, Australia, and Canada.[57] The growing deficit with China, heavily influenced by Wal-Mart imports, is estimated to have moved over 1.5 million American jobs to China between 1989 and 2003.[58] According to the AFL-CIO, "Wal-Mart is the single largest importer of foreign-produced goods in the United States", their biggest trading partner is China, and their trade with China alone constitutes approximately 10 percent of the total US trade deficit with China as of 2004.[59] While the company certainly imports many products, the company also claims that it purchases goods from more than 68,000 U.S. vendors, spending $137.5 billion in 2004, and supporting more than 3.5 million supplier jobs in the U.S.[60]

[edit] Overseas labor concerns

There are many concerns over Wal-Mart's use of foreign labor, particularly over its failure to maintain adequate supervision over its foreign suppliers, as well as incidents of products have been made using sweatshops or alleged slave labor. For example, in 1995, Chinese dissident Harry Wu discovered that Wal-Mart was contracting prison "slave labor" in Guangdong Province.[61] There have also been reports of teenagers in Bangladesh working in, "sweatshops", approximately 80 hours per week, at $0.14 per hour, for Wal-Mart contractor Beximco, and in 1994, Guatemalan Wendy Diaz reported that she had been working for Wal-Mart at $0.30 per hour at the age of 13.[61] The documentary, Wal-Mart: The High Cost of Low Price, also claims that the factories that produce goods for Wal-Mart are in poor condition and that factory workers are subject to abuse and inhumane conditions.

According to Wal-Mart, as well as many advocates of free trade, comparisons of wage levels between vastly different countries is not a useful way to assess the fairness of a trade policy. The company also asserts that wages paid to overseas workers are comparable to or exceed local prevailing wages. In that case, the company claims that the overseas manufacturing jobs it creates are often an improvement in the quality of life for its employees. They have also asserted that factory jobs with its suppliers are often safer and healthier than local alternatives, which may include prostitution, the drug trade or scavenging.

Wal-mart currently uses in-house monitoring, which, critics say, leaves outsiders unable to verify reforms. Since no external agency, such as Social Accountability International or the Fair Labor Association, is involved and Wal-Mart will not release its audits or even factory names, the public is left to simply take their word for it.[62] In 2004, Wal-Mart began working with Business for Social Responsibility, a San Francisco-based nonprofit, to reach out to groups active in monitoring overseas plants. "Wal-Mart is at an early stage", says BSR President Aron Cramer, "and it's likely that they, like most companies that engage in these processes, will adapt their approach over time."[63]

[edit] Product selection

Wal-Mart's product selection has been criticized by some groups in the past, primarily as viewed as a promotion of a particular ideology or as a responses to their original rural, religious target market. For example, in 2003, Wal-Mart removed certain men's magazines from their shelves, such as Maxim, FHM, and Stuff, citing customer complaints regarding their racy content.[64] Later that year, they decided to partly obscure the covers of Redbook, Cosmopolitan, and Marie Claire due to, "customer concerns", and also refused to stock an issue of Sports Illustrated's swimsuit special because it took exception to one photograph.[65]

Since 1991, Wal-Mart also has not carried music albums marked with the RIAA's Parental Advisory Label, although they do carry edited versions, with obscentities removed or overdubbed with less offensive lyrics, of such albums.[66] In one example, in 2005, Wal-Mart rejected the original cover of Willie Nelson's reggae album, Countryman, which featured marijuana leaves, in an apparent pro-marijuana statement. To satisfy Wal-mart, the record label, Lost Highway, issued the album with an alternate cover, without recalling the original cover.[67]

In 1999, Wal-Mart announced that it would not stock emergency contraception pills in its pharmacies,[68] claiming that it had the legal right to carry and sell whatever products its consumers and/or shareholders desired. In February 2006, three women filed suit against the company in Massachusetts after they were unable to purchase emergency contraception at their local Wal-Mart stores.[69] The women won the suit and the Massachusetts Pharmacy Board ruled that Wal-Mart must stock the drug in all of its pharmacies within Massachusetts.[69] Expecting that other states would soon do the same, Wal-Mart reversed its policy and announced that they would begin to stock the drug nationwide.[69] The company has maintained its conscientious objection policy, however, which allows any Wal-Mart pharmacy employee who does not feel comfortable dispensing a prescription to refer customers to another pharmacy.[69]

Wal-Mart has also been criticized for some of the products that it does carry. For example, the company was criticized for selling the notoriously anti-Semitic, The Protocols of the Elders of Zion, text on its website. Most scholars consider the text to be a forgery, but Wal-Mart's product description suggested the text might be genuine. Wal-Mart stopped selling the book in September, 2004, though the document is still available for purchase from many other booksellers, who sell it in the interests of freedom of speech.

In October 2004, Wal-Mart canceled its order for, The Daily Show's America (The Book) after discovering a page that depicts each Supreme Court judge in the nude. A week later, they returned copies of George Carlin's When Will Jesus Bring the Pork Chops?, with a cover recreating The Last Supper with Jesus' seat empty and Carlin seated next to it. The company claimed that the copies were shipped to them by mistake and a Wal-mart spokeswoman said she, "didn't believe this particular product would appeal" to its customer base.[70]

In January 2006, the company was criticized for suggesting that some African American-related DVDs, such as Introducing Dorothy Dandridge and documentaries on Martin Luther King, Jr. were items similar to the Planet of the Apes television series DVD box set. They quickly corrected the page, saying that it was a software glitch, though it ultimately blamed the matter on human error.[71]

While Wal-Mart's product selection may be seen by some as censorship, others view this from a free enterprise standpoint, that criticism of Wal-Mart's product selection is misguided because Wal-Mart is free to carry and sell whatever products it chooses and that customers are free to shop elsewhere, and would do so if they were in disagreement with its perceived moral values.[72]

[edit] Taxes

Until the mid-1990s, Wal-Mart took out corporate-owned life insurance policies on low level employees, such as janitors, cashiers, cart pushers, and stockers. This type of insurance is usually purchased to cover a company against financial loss when an executive or other high ranking employee dies. In this case it is usually known as "Key Man Insurance", but the policies that Wal-Mart took out on its rank-and-file workers were derided as "Dead Peasants Insurance" or "Janitor Insurance". Critics (such as the U.S. Internal Revenue Service) charge that the company was trying to profit from the deaths of its employees, and take advantage of a loophole in a tax law which allowed them to deduct the premiums. The practice was stopped in the mid-1990s when the federal government, which had previously called the financing scheme "tax arbitrage", closed the tax loophole and began to pursue Wal-Mart for back taxes.[73]

[edit] See also

[edit] References

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[edit] External links

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Key People: Sam Walton | David Glass | Lee Scott | Jim C. Walton | Bud Walton | S. Robson Walton | Douglas Daft

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See Also: Criticism of Wal-Mart | History of Wal-Mart | List of assets owned by Wal-Mart Stores, Inc. | List of Wal-Mart brands | Wal-Mart: The High Cost of Low Price

Annual Revenue: $288 billion USD (10% FY 2005) | Employees: 1.7 million | Stock Symbol: NYSE: WMT | Website: www.walmartstores.com
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