Dr. DiLorenzo, this month’s guest editor, is Professor of Economics at Loyola College in Maryland.
Many economists have long viewed unions as essentially cartels of workers which collude to push their wages above free-market levels. As Texas A&M University labor economist Morgan Reynolds has explained: “Unions are fundamentally cartels—groups of producers with sectional interests diametrically opposed to those of consumers. Unions are labor OPECs” whose rallying cries have always been “take competition out of wages” and “take labor out of competition.”[1]
Competition and the entry of new (and lower-priced) competitors are the bane of all cartels. Even the infamous OPEC oil cartel collapsed once American and other oil producers significantly increased their oil production and lowered their prices. Unions have always attempted to block competition from nonunion workers through special-interest legislation and regulation, and by committing acts of violence and intimidation against nonunion workers. For the entry of nonunion workers is just as devastating to a union cartel as a new lower-priced competitor is to a business cartel.
The purpose of all cartels is to raise prices above competitive levels and to redistribute income from consumers to cartel members. When unions successfully raise the price of labor above free-market levels, much of the employers’ higher labor costs are passed on to consumers.
America’s struggling private-sector unions, which today represent no more than 10 percent of the labor force, recognize that in order to increase union membership and, more importantly from the union’s perspective, to increase dues revenues, they must devise new techniques to destroy the threat of nonunion labor in their industries. In the grocery industry in particular, unions have recognized that the key to increased unionization is a new definition of “market share”: the share of a market that is controlled by unionized firms. If the grocery industry, for example, were 100 percent unionized, then there would be no competitive threat from lower-priced, nonunion grocery stores that would take business away from higher-priced, unionized stores by providing consumers better value for their money. This paper examines the implications of recent “corporate campaigns” in the grocery industry.
The Union Imperative to Raise Grocery Prices
It is instructive to listen to what union organizers themselves have said about their self-imposed imperative to either raise the prices of nonunion grocery stores or drive those stores into bankruptcy. Consider a speech delivered by Douglas H. Dority, the executive vice president and international director of organizing of the United Food and Commercial Workers International Union at a 1990 union organizers’ conference.[2] The biggest problem facing the union, said Dority, is that “nonunion stores grew faster [during the 1980s] than we organized them” so that “the lesson of the ’80s is market share.”[3]
“We must educate our members about market share,” said Dority, and explain to them the union’s newly designed strategy for cartelizing the grocery market. The key point of advice offered by Dority was: “When the unionized share of the grocery dollar declines in any geographic area, our ability to produce at the bargaining table is diminished. That is what happens when we fail to organize the nonunion competition.” (emphasis added)
Dority compared the Washington, D.C., and Tidewater, Virginia, grocery markets, the former being about 90 percent unionized, whereas the latter is only about 10 percent union. The effect is a difference in hourly wages of “about two dollars,” which leads to the second most important point, according to Dority: “When a company expands its nonunion operations—in the same geographic area or elsewhere—it can better withstand a strike to achieve our members’ bargaining objectives.” (emphasis added)
In the eyes of union organizers the existence of nonunion grocery firms is a deadly force against their campaign to cartelize the labor market in that industry. The union imperative, therefore, is to increase “the unionized share” of stores in every market and, especially, to organize doublebreasted companies—ones that have both union and nonunion stores. This strategy, Dority says, represents “a sea change in union thinking.”
Perhaps the biggest threat to union cartelization efforts in the grocery industry, according to Dority, are the low-priced “warehouse clubs” and “hypermarkets” which “we have shown we can hurt with picket lines and [bad] publicity.” Another “very real threat” to the market share/cartelization strategy is “the nonunion chains—the Food Lions, Price Choppers, and Hy-Vees of our industry.” “Over the long run, we must either reduce these chains’ market share . . . or we must put them out of business. There is no other option.” (emphasis added) Low prices may be a “threat” to Dority’s position as a union organizer, but they are a great benefit to consumers, especially lower-income consumers.
Other union executives in the industry have voiced similar sentiments. Joe Crump, the secretary/treasurer of the Grand Rapids, Michigan, local of the United Food and Commercial Workers Union (UFCW), stated in Labor Research Review that his union defines successful organizing in one of two ways: “either a ratified, signed collective bargaining agreement with a previously non-union employer or a curtailment of a nonunion operator’s business, including shutting the business down. Neither of these outcomes will occur by relying on the NLRB.”[4] (emphasis added) A self-congratulatory Crump then boasted that “after a three year struggle, the battle with [the nonunion] Family Foods is over. . . . The company went out of business.”[5] Family Foods’ employees lost their jobs and consumers in those areas where its stores had competed with higher-priced, unionized stores began paying higher prices, something this “labor leader” is most proud of.
Clearly, driving one’s competitors out of business may be good for aspiring monopolists, but is bad for consumers and those workers at companies like Family Foods who lose their jobs. Low-income Americans will be hurt the most, as they always are when prices rise.
“Organizing is war,” says Crump, and that means harassing nonunion employers and “costing them enough time and energy and money to either eliminate them or get them to surrender to the union.”[6] Employers must be made to “pay for operating nonunion.”[7] “If we can’t organize [nonunion supermarkets],” says Tom McNutt, president of Local 400 of the UFCW, “the best thing to do is to erode their business as much as possible.”[8]
Sometimes unionized grocery stores conspire with their unions to try to drive their lower-priced, nonunion competitors from the market. As Crump correctly points out, unionized employers “love to see their nonunion competitors having such a tough time.”[9] This kind of business/union conspiracy may be directed toward nonunion stores, but the ultimate victim is the consumer.
And union harassment campaigns (discussed in detail below) can bankrupt a grocery store more easily than most people might imagine, given that profit margins in the 3 percent range (as a percentage of sales) are common. As Crump instructs his fellow union organizers: “If a supermarket loses 10 percent of its customers, its profitability is probably eliminated.”[10]
The Union Assault on Employee Freedom
The ultimate objective of “corporate campaigning” is to pressure the company to accept a union without ever permitting its employees to vote on whether or not they want a union. That is what Crump meant when he said that neither of his two top priorities as a union organizer—to either have a company sign a union contract, or go bankrupt—would ever “occur by relying on the NLRB” and its electoral certification processes. This is a stark admission that, at least in the grocery industry, unionization cannot succeed if employees are allowed to vote on whether or not they want a union. Extortion has replaced organizing.
A most telling document entitled “Developing New Tactics: Winning With Coordinated Corporate Campaigns,” published by the AFL-CIO, describes to union organizers how “United Food and Commercial Workers Local 400 had tried for years to organize the Magruder’s supermarket chain in the Washington, D.C., metropolitan area.”[11] After the union picketed the stores and “informed the public” about the store’s allegedly substandard products and labor practices, “Magruder’s voluntarily recognized the union—without an NLRB [National Labor Relations Board] election” because it wanted to avoid “the threat of informational pickets and bad publicity.”[12]
The word “voluntary” here is used in a most peculiar way. When one succumbs to threats and intimidation, which is what the corporate campaign against Magruder’s was, one thinks of extortion rather than voluntarism.
Crump promotes this tactic by pointing to a kind of history lesson: in 1937 more than 3 million workers joined unions in the United States but “only 2,470 used NLRB elections as the vehicle to gain their collective bargaining rights. The rest employed `other means.”’[13] By using such strategies, Crump advises, “you don’t need a majority or even 30% support among the employees. A few people inside and outside are all that’s necessary. . . . Fired employees are a great source of information.”[14] Organizing employees can be “complex and unpredictable,” says Crump, but “employers are simple and predictable—organize employers, not employees.”[15]
He recognizes that “waging economic war on an unorganized company” might “turn employees against the union,”[16] but then advises union organizers to forget about that—employees’ opinions need not matter. For “if you had massive employee support, you probably would be conducting a traditional organizing campaign” in which employees were permitted to vote on whether or not they wanted a union.[17]
Thus, the essence of the “corporate campaign” strategy is this: Unions cannot convince workers to join their union voluntarily through NLRB elections, so they intimidate and threaten to extort employers until they sign a contract with the union without holding a union certification election. Despite all the talk in union circles about “workplace democracy,” such tactics are anything but democratic: they are designed specifically to avoid the “inconvenience” of holding union certification elections, which the unions know they will lose.
The “Threat” of Competition
A recent New York Times article about national competition in the grocery industry explains why unions are so intent on literally destroying nonunion grocery stores and why, if they are successful, this strategy will greatly harm American consumers. The article contrasts grocery store chains in the heavily- unionized Northeastern states with those in the largely nonunion South and describes how Southern chains are expanding into the Northern states and providing new competition.
In a unionized store in affluent Westchester County, New York, “shoppers squeezed their carts through aisles cluttered with towers of unpacked boxes that blocked the goods on the shelves. Whole shelves yawned emptily, unstocked. Customers waited in lines as checkout clerks doubled as baggers. Spilled milk by the dairy cooler had not been cleaned up. The floors were littered with flattened vegetables and packing materials. . . . A clerk maneuvered a broom along the aisles, redistributing the litter instead of cleaning it up.”[18] Much of the population of the North “has become inured to poor service” and many Northerners “put up with conditions that people in the South would not accept,” observes a retail expert at Smith Barney.[19]
A supermarket run by the nonunion firm, Publix, in a middle-class Florida community “offered a startling contrast,” according to the Times: “clutter free, wide-aisled, spotless” and with helpful employees.[20] Publix is part of a “revolution” that is “transforming the supermarket business in the South and West,” the Times observes, where fierce competition is providing customers with superior service at competitive or lower prices. The Publix chain, for example, enjoys lower labor costs and “uses the tenets of aggressive management and employee ownership to create a culture that values efficiency and service.”[21] The 64- year-old company has been owned entirely by employees, managers, and the family of the firm’s founder, the late George Jenkins. (Employees become eligible to purchase stock after working there for one year.)
A 1993 survey of 10,000 readers of Consumer Reports magazine rated Publix the best supermarket chain in America over 23 competitors. The service is so good at Publix that the firm has had to advertise that its prices are competitive “because some customers think it is a luxury chain.”[22]
Publix employees are paid bonuses tied to the revenues of the stores and can make as much as $300 extra during each 13-week inventory period. They are also not subjected to rigid work rules, such as the ones that exist in unionized supermarkets. In some unionized stores, “if the customer spills a bottle of jelly in the aisle, the rules might prevent a cashier from sweeping up, even if the cashier is idly sitting around with no customers.”[23] It is these kinds of rules that have been so detrimental to other unionized industries, such as autos and steel, and are a plague on efficiency. That’s why Publix executives recognize that a key to their (and their employees’) financial success is a union-free workplace.
Flexible labor relations are a key to the company’s efficiency, and such flexibility is rarely—if ever—found in unionized firms. Rigid job descriptions and restrictive work practices ratchet up costs and prices at unionized grocery chains, all to the detriment of the consumer. These higher costs and prices also threaten the job security of unionized employees who work for uncompetitive businesses, as auto and steel workers have learned all too well over the past 25 years.
Not surprisingly, the UFCW has launched a propaganda campaign against Publix, accusing the company of “gender discrimination” on the grounds that “too few” women are managers. But merely claiming that the number of female managers is “too small” does not prove that any discrimination has occurred, any more than claiming there are “too few” white professional basketball players proves that the National Basketball Association racially discriminates against white players. The union obviously hopes that mere repetition of the charge will harm the company’s public image and, consequently, its sales.
The Propaganda Campaign Against Food Lion
Unions have not been successful in organizing the employees of companies like Publix or Food Lion because the great majority of the employees there do not want to be unionized. Having abandoned any pretense of organizing a union at Food Lion, the UFCW has waged a “corporate campaign” against Food Lion designed to force the company out of business or, at a minimum, to preserve the market share of unionized stores. The union assault on Food Lion provides a case study of the anti-consumer conspiracy known in union circles as “corporate campaigning.”
One of the first tactics of the campaign against Food Lion was to persuade ABC News to air a story that promoted the outlandish union claim that Food Lion stores routinely sold rotten fish and ham, covering up the spoilage by bathing the meats in Clorox. The show was aired on November 5, 1992. “Diane Sawyer and her producers worked hand-in-hand with the union, and then did their best to pretend that it had little or no role in the broadcast,” the Washington Times revealed.[24] Apparently, the union provided ABC’s “Prime Time Live” with a roster of “disgruntled former employees” to interview, which the network did. The UFCW also gave an “undercover” ABC News reporter “minimal training and arranged for a phony letter of recommendation so she could get a job at Food Lion.”[25]
The notion that any supermarket could get away with routinely selling ham bathed in bleach in the hyper-competitive grocery industry is absurd. If a grocer were so foolish as to attempt it, customers could certainly detect it, if the grocer’s competitors did not do so first. The immediate result would be a loss of sales or even bankruptcy. No grocery chain (all of which, incidentally, rely on repeat sales more than most other businesses) could be as successful as Food Lion has been by selling rotten food that smells of bleach. Consumers are just not that easy to manipulate.
Food Lion was one of the fastest growing supermarket chains in the country before the ABC News segment, opening more than 800 stores from 1983 to 1992, with sales and earnings increasing by 22.5 percent and 23.3 percent, respectively.[26] But Food Lion’s earnings fell by 55 percent in the fourth quarter of 1992 and its earnings for the first quarter of 1993 were 56 percent below the first quarter of the previous year. The company also reported that its net income declined by 41.6 percent for the second quarter of 1993 compared to the second quarter of 1992.[27] The chain closed 88 stores in 1994, laying off 1,300 full-time and 2,200 part-time workers.[28] The closing of these stores also diminished the degree of competition somewhat—at least in some markets—which can only harm the consumer. ABC apparently made no attempt to shoot film footage of some of the filthy and unsanitary supermarket environments of the unionized firms in the Northeast—including the New York City area, where ABC News is located—described by the New York Times as “supermarket purgatory.”[29]
Union “Front” Organizations
The attack on Food Lion is so blatantly anti-consumer and so obviously a union scheme, that the union decided it had better set up a front organization to implement its “campaign.” It established “Consumers United With Employees (CUE),” a front organization that has the same mailing address as the Food and Allied Service Trades, a subsidiary of the AFL-CIO. Also part of the organization are other, older union front organizations such as the National Consumers League (NCL). For years, the NCL has advocated such anti-consumer but pro-union policies as increases in the minimum wage, bans on “home work,” and limitations on the hours teenagers may be allowed to work. The purpose of such front organizations is to fool the public into believing that the attack on Food Lion and other nonunion companies are not motivated by greedy unions, but by selfless and public-spirited “consumer advocates” united with “employees.”
The first tactic employed by CUE was to issue a series of headline-grabbing press releases on February 4, 1994, claiming that it had conducted a “study” of Food Lion and had “discovered” the chain allegedly posed a threat to the health of babies through “sale of outdated infant formula at Food Lion Supermarkets.”[30] In a letter to CUE members the same day, signed by Robert F. Harbrant, President of the Food and Allied Service Trades Department of the AFL-CIO “on behalf of C.U.E.,” Harbrant urged CUE members to “contact your Congressional representatives and urge them to investigate this matter,” and “contact your state and local representatives” also.[31] The organization also contacted the U.S. Food and Drug Administration and urged it to investigate Food Lion (but not any other grocery chain).
The “report” did not mention that “outdated formula” poses no health hazard; only that the manufacturer cannot guarantee the freshness of the ingredients after that date. A spokesman for the U.S. Food and Drug Administration tried to calm mothers who might have been frightened by the CUE “report” by announcing that “outdated baby formula doesn’t pose a health hazard.”[32]
The union also made no attempt to compare sales of outdated formula (and other items) at Food Lion stores with those of other grocery chains, especially unionized stores. There are bound to be “outdated” products to some degree at virtually every grocery store, not just at the nonunion ones. When asked why he didn’t examine infant formula dates in unionized stores, Sean Cunniff, a CUE spokesman, pleaded poverty: “It’s very difficult in terms of resources. . . .”[33]
CUE has specifically targeted Food Lion stores in Virginia with its “inspections,” for Virginia is a state in which Food Lion is currently attempting to expand into the highly-unionized Northern Virginia market that is dominated by Giant Foods and Safeway. But a spokeswoman for the Virginia Department of Agriculture stated publicly that “in Virginia, Food Lion’s overall compliance rate with state-inspection requirements is among the highest in the state.”[34] Bob Gordon, director of the North Carolina Department of Agriculture’s Division of Food and Drug Protection, called the “report” a “low blow” by CUE and said that “much has been made about nothing.”[35]
The whole episode is foolish, says Gordon, because “any consumer can pick up a can or bottle and see the expiration date.”[36] Gordon makes an important point: Even if infant formula—or any other product—is “outdated,” the fact that it is indeed outdated is clearly written on the package!
A more comprehensive comparison of all grocery chains in the markets focused on by CUE found that in every single instance, the nonunion grocery chains performed better than the unionized ones in terms of the number of outdated products found on the shelves.[37]
Using Regulation to Reduce Competition and Raise Prices
A union organizers’ manual published by the AFL-CIO informs its readers that “businesses are regulated by a virtual alphabet soup of federal, state and local agencies, which monitor nearly every aspect of corporate behavior.”[38] This is a sad but true statement about the American workplace—it is awash in regulations, most of which are impossible for mere humans to understand, let alone comply with. One U.S. Department of Agriculture official candidly stated, for instance, that if all meat-inspecting regulations were actually enforced to the letter, there would be no meat-processor in America open for business.[39]
Unions—especially the UFCW—have taken advantage of this fact to impose regulatory costs on nonunion firms as another tactic in their corporate campaigns. As the AFL-CIO manual states, “unions can use the regulators to their advantage. An intransigent employer may find that in addition to labor troubles, there are suddenly government problems as well.”[40] The manual then advises union organizers to catalogue the myriad rules and regulations that nonunion companies must comply with and try to determine if they are in total and complete compliance, a virtual impossibility for any business. If not, they should be reported by the union to the regulators, who are all too happy to be able to justify their jobs. If noncompliance is determined, press releases should be forthcoming so as to impose public relations costs on the nonunion firms as well. As the Wall Street Journal has stated, “unions are using regulatory laws as strategic weapons in their organizing and bargaining battles,” the purpose of which is to “harass them in the marketplace and blackmail them into voluntarily recognizing unions without a National Labor Relations Board-sponsored election.”[41] This tactic has worked in some cases already; in Salt Lake City, Utah, Smith’s Food and Drug Centers, Inc. “voluntarily recognized the union at its Phoenix stores” when confronted with the possibility of protracted and expensive litigation instigated by UFCW organizers.[42]
UFCW organizer Joe Crump has recognized that because of the sheer size and complexity of federal regulation, “virtually all companies are wholesale law breakers. Even `good’ ones, even organized ones.”[43] Crump knows that it is impossible for businesses to be in compliance with all laws and regulation at all times, even if they sincerely wanted to, for there’s civil rights laws and wage-and-hour laws. Safety-and-health laws and right-to-know. Unemployment compensation and workers compensation requirements, and Social Security, plant closing and pension laws. There’s public health and environmental laws. And at the local level, there’s zoning and fire codes and various ordinances. At all levels, there are tax laws.[44]
The point here is that regulation is so out of control that any business person in America, at any one time, is most certainly “guilty” of noncompliance with at least some regulations. It is beyond human comprehension to possess knowledge of the tens of thousands of OSHA, EPA, IRS, and other regulations. The unions realize this—indeed, they lobbied for many of the regulations in the first place—and intend to use regulation as a tool for extorting “concessions” from nonunion employers, i.e., recognition of the union without a representation election. This is yet another reason why deregulation of labor relations—and of the economy in general— is sorely needed if the American economy is to prosper. Far from protecting the consumer, as they are in theory supposed to do, such regulations typically impose great harm on consumers and employees.
Conclusions
So-called corporate campaigns might best be described as the practice of predatory unionism. The purpose of the “campaigns,” as stated by the AFL-CIO and its affiliates, such as the UFCW, is to use whatever means necessary—propaganda campaigns, abuse of the regulatory system—either to drive up the costs and prices of nonunion firms or to drive them into bankruptcy.
As cartels of workers, grocery unions cannot succeed if there are lower-priced (nonunion) grocery stores in the same market. Thus, it is imperative to them that, at the very least, grocery prices be raised at nonunion stores.
This kind of predatory unionism is not only anti-consumer; it is also anti-poor. Higher grocery prices impose a greater burden on lower-income consumers than on the more affluent. Informed consumers should take whatever unions and their front organizations say about nonunion businesses—in the grocery industry or elsewhere—with a very large grain of salt. []
1. Morgan O. Reynolds, Power and Privilege: Labor Unions in America (New York: Universe Books, 1984), p. 44.
2. Remarks by Douglas H. Dority at the United Food and Commercial Workers Union Retail Food Conference, Tropicana Hotel, Las Vegas, Nevada, October 29, 1990.
3. Ibid. The following quotations of Dority are all from this speech.
4. Joe Crump, “The Pressure is On: Organizing Without the NLRB,” Labor Research Review, vol. 18, p. 34.
8. Randall Bloomquist, “Tom McNutt: He’s Built a Working-Class Empire on Innovation and a Willingness to Deal,” Regardies: The Business of Washington, July 1988, p. 2.
11. Industrial Union Dept., AFL-CIO, “Developing New Tactics: Winning With Coordinated Corporate Campaigns” (1985), published by AFL-CIO, 815 16th St., NW, Washington, D.C. 20006.
13. Joe Crump, “The Pressure is On,” p. 41.
18. Glenn Collins, “In Grocery War, the South Rises,” New York Times, April 25, 1995, p. C-1.
24. “The War Against Food Lion, Phase II,” Washington Times, Feb. 7, 1994, p. A-20.
25. “A Union’s Corporate Campaign,” Washington Times, May 7, 1995, p. B-2.
26. Eleena de Lisser, “Food Lion Hopes to Prove It’s Not a Toothless Tiger,” Wall Street Journal, May 6, 1993, p. B-4.
27. Adams et al., “An Analysis of the UFCW’s Campaign,” p. 561.
28. “The War Against Food Lion, Phase 2.”
29. Glenn Collins, “In Grocery War,” p. C-1.
30. CUE Press Release dated Feb. 4, 1994.
31. Letter to CUE members, Feb. 4, 1994, by Robert F. Harbrant, President, Food and Allied Service Trades Department, AFL-CIO, “on behalf of C.U.E.”
32. Eleena de Lisser, “Union Group Says Food Lion Inc. Stocks Stale Goods,” Wall Street Journal, Feb. 4, 1994, p. A-5B.
33. Lisa Saxton, “Food Lion Hit by Claim on Dating, Refunds,” Supermarket News, April 24, 1995.
35. Neil Holthouser, “Group Singles Out Food Lion,” Salisbury (N.C.) Post, Feb. 4, 1994, p. 1-A.
36. James Greiff, “Grocer Coolly Confronts Allegations,” Charlotte Observer, Feb. 5, 1994, p. D-1.
37. Thomas J. DiLorenzo, “The Corporate Campaign Against Food Lion: Media Manipulation by `Consumer Activists,”’ prepared for a symposium on “Comprehensive Corporate Campaigns” sponsored by the John M. Olin Institute for Employment Practice and Policy, Washington, D.C., Nov. 16, 1995.
38. AFL-CIO, “Developing New Tactics,” p. 6.
39. Philip K. Howard, The Death of Common Sense: How Law is Suffocating America (New York: Random House, 1994), p. 32.
40. AFL-CIO, “Developing New Tactics,” p. 6.
41. Robert Tomsho, “Unions Search for Regulatory Violations To Pressure Firms and Win New Members,” Wall Street Journal, Feb. 28, 1992, p. B-1.
43. Crump, “Organizing Without the NLRB,” p. 39.
Thomas J. DiLorenzo
Thomas DiLorenzo is an author and professor of economics at Loyola University Maryland.
