The High Cost of Low Prices, Take 2 (Gov't Jag-Off Edition)


A reader who wishes to remain anonymous sent this link to me a while back. It's about wildly different prices at nearby Wal-Marts along a while back. Incredible.

And a laptop that cost $398 in Woodbury [Minnesota], cost $632 in Hudson [Wisconsin; the two cities are 10 miles apart]. That's a difference of $234 for the exact same computer.

"That's unreal, isn't it?" says Judy Darwin of Hudson. "May as well go across the border."

"How can they do that? It's the same store," says Amy Weiser of Madison, Wisconsin.

The answer dates all the way back to 1939, when Wisconsin lawmakers passed the Unfair Sales Act. That state law says it's illegal for retailers to sell items below cost. It's supposed to ensure a competitive marketplace.

"Kind-of irritates me," one Wisconsin customer said.

Whole thing here. And let me state for the record that I abhor Wal-Mart's recent turn to the dark side when it comes to extracting goodies from local governments–especially since they used to actually buy their way into towns by offering to do various sorts of infrastructure upgrades.

A decade ago–a century in retailing years–I wrote about the then-burgeoning anti-superstore movement for Reason. That meant researching previous attempts to crush chains:

In the 1920s, chain stores were the pariah of the day, particularly the A&P grocery stores (at its height, A&P operated over 15,000 shops in the United States). Chains, because of larger economies of scale and increased efficiencies in distribution, tended to sell a wider variety of goods at cheaper prices, which cut into local merchants' profits. The chains were new, different, and very successful.

As chains began to dominate the commercial landscape, they, like the superstores of today, came under attack as destructive and evil. Louis D. Brandeis attacked them along "human scale" lines: "I have considered and do consider that the proposition that mere bigness cannot be an offense against society is false, because I believe that our society, which rests upon democracy, cannot endure under such conditions." A chain-baiting radio personality exhorted Americans, "Wake up! We can whip these chain stores….We can drive them out in thirty days if you people will stay out of their stores." A 1922 book, Meeting Chain Store Competition, offered this analysis: "Every retailer who has to meet chain store competition…needs no one to tell him what a chain store is. To him, it is a cut rate competitor managed from the outside by a soul-less corporation."

Chain baiting, although ultimately unsuccessful, had consequences. As Harvard Business School professor Richard S. Tedlow notes in his 1990 book, New and Improved: The Story of Mass Marketing in America (from which the previous examples are drawn), "In 1933, some 225 anti-chain bills were introduced in 42 state legislatures; 13 were passed. Chain taxes had been passed in 27 states by 1939, although not all were still in force that year." It also prompted longer-lasting federal antitrust legislation aimed at reducing the chains' advantages; the laws had the effect of raising prices to the average consumer.

More here.