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Wal-Mart and the New Jersey Bans

Case Study - Business Law by Professor Lenny Roth Andy, Irena, Moshi & Valentine

Moshi Blum

on 1 July 2011

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Transcript of Wal-Mart and the New Jersey Bans

Low wages jobs (no union)
Kill local biz & entrepreneurship
Kill "Main Street" concept
Create traffic jams
Burden on services (Fire, Police, Emergency)
Pollution - noise, lights, garbage Ethical Aspects Social Responsiblity Anti-Trust case Introduction Constitutional case Walmart & the New-Jersey Bans Thank You! Questions? Andy Shapiro Katz
Iryna Axenfeld
Moshi Blum
Valentin Rabinovich what is walmart what's is the problem? Lower prices for consumers
More choices
Higher property tax
Develops infrastructure
Decreases unemployment Stakeholder: Workers Union
The coalition of supermarkets
Environmental groups
Community committees Social responsibility: consumers Vs. Resident Tools for dealing with the problem Local zoning
state law / commission
Anti-trust laws Vs. Commerce Clause: Federal issue?
policing power Is walmart a legal situation?
ANP Ethics: Utalitarian approach
Kantian Approach motive Local people local biz Universal Princeple Walmart Walmart was founded by Sam Walton in 1962
8,970 stores (2010)
Net income of $17 B on $422 B of revenue in 2010
Public owned company
Largest private employer
"Big Box" store
Locations in USA New Jersey State: Population: 8.7M
Size of Israel
Most of the people live in small communities (small cities & towns) New Jersey's ban The bill restricts the construction of new "Big Box" retailers according to specific criteria:
Larger than 130,000 square feet
Sells more than 25,000 products
Carries at least 10% of inventory in food

"De Facto" - Prevents Walmart from building new stores in the state of New Jersey Con's: Pro's: Stakeholders Walmart Shareholders
Consumers Protection groups Preventing Walmart to enter due to state restriction, to
preserve local business and communities?
Is Walmart too big to be treated like other businesses? Dormant Commerce Clause Also known as the "Negative" Commerce Clause
Inferred from the Commerce Clause in Article I of the United States Constitution
Constitution grants Congress the power to regulate commerce "among the several states"
This implies a "negative converse" - that no other body is allowed to regulate inter-state commerce States or localities are barred from passing legislation that improperly burdens or discriminates against interstate commerce Police Power Derived from the Tenth Amendment to the US Constitution
Confers to the states, and through them to localities, the authority to "enact measures to preserve and protect the safety, health, welfare, and morals of the community"
Authority is executed through the the passage of laws and regulations, and the establishment of agencies
Examples of agencies include police, fire, emergency as well as schools and medical facilities
Examples of laws and regulations include zoning, land use, building codes, restrictions on gambling and alcohol, anti-discrimination laws, parking rules, licensing of professionals, etc. states or localities have the authority to pass laws to protect safety, health, welfare, and morals Substantive Due Process & "Taking" Derived from the Fifth and Fourteenth Amendments to the US Constitution
No person shall be…deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.
Government must respect all of the legal rights that are owed to a person according to the law
Corporations are considered "persons" If a state's use of police power does not promote the health, safety, or welfare of the community, it is likely to be ruled unconstitutional as a "taking" Walmart's Strategy Must show that the law discriminates on its face against interstate commerce
"Discrimination" can mean only differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter
That law is invalid if it is just "simple economic protectionism" Law violates Dormant Commerce Clause Law constitutes a "Taking" Must show that the state law is not substantively protecting safety, health, welfare, and morals New Jersey Strategy It does not distinguish between in-state and out-of-state businesses
It is motivated by other interests and not protectionism The big-box stores have a real record of threatening safety, health, welfare, and morals
These threats are real for many New Jersey communities
The law is not absolute; it just gives the state the ability to prevent a big-box store from opening when there really is a threat Law is not a "Taking" Law does not violate Dormant Commerce Clause Can local communities fight Wal-Mart as a monopolist?
What is a monopoly? It is the power over consumers, leading to high prices.
But prices in Wal-Mart are low and products are ubiquitous. Monopoly Low Prices Monopsony In economics, a monopsony (from Ancient Greek μόνος (monos) "single" + ὀψωνία (opsōnia) "purchase") is a market form in which only one buyer faces many sellers. It is an example of imperfect competition. As the only purchaser of a good or service, the "monopsonist" may dictate terms to its suppliers Can local communities ban Wal-Mart as monopolist? Anti-trust allegation will probably not succeed. However, negative effect on local businesses is obvious.
Thus legislators will have to decide whether aggressive competition is bad. But it shatters the foundation of a free market economy. But this is a federal issue. The Problem Utilitarian ethics “The greatest good for the greatest number!” What weighs more ? Low prices
Property taxes
Infrastructure upgrade
Jobs Low wages
Less health protection
Kills local business and entrepreneurship
Traffic problem
Burdening services Kantian ethics “Only actions performed for the sake of duty have moral worth” BUT!!! Universalisability “Can it be willed universally without contradiction?” Kills local business
Ruins community life Ends in themselves - treating stakeholders as persons and never as a means merely. low wages and poor health benefits for employees
Obligation to shareholders to make profits Kingdom of ends - the firm as a moral community. social responsibility:
“big stores” benefit from society, they have an obligation to benefit society in return Does being “socially responsible” help? Can Wal-Mart create more jobs than it destroys? Can infrastructure be designed so that it doesn’t disturb residents? Anti-trust allegations Wal-Mart has a large market share and is able to demand low prices from suppliers.
Suppliers compete with each other for a very small margin.
The result: only strongest suppliers survive, M&As. Many production jobs are lost. Walmart is a monopsony Ester Spector
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