Vendor reps rap Wal-Mart effort to deal direct - independent sales representative and brokers

Discount Store News, Jan 6, 1992 by Richard Halverson

Vendor Reps Rap Wal-Mart Effort To Deal Direct

DALLAS - Independent sales reps and brokers who have been barred from doing business with Wal-Mart aren't about to go away quietly.

Instead, they again have organized to fight the ban through public relations campaigns and lobbying efforts to pass laws prohibiting such actions as Wal-Mart's. Moreover, one group of representatives has started to raise funds to sue Wal-Mart on the same grounds that reps successfully fought a similar ban from Fingerhut. Those grounds were "tortious interference with contract."

The National Food Brokers Association, Washington, D.C., has formed the Coalition of Americans to Save the Economy and is prepared as a last resort to raise money from its 40,000 members to support a legal battle if their efforts fail to "educate the public" and Wal-Mart about the benefits of using reps.

In addition, a number of manufacturers sales reps and brokers in Dallas have formed a coalition called, Friends For Free Enterprise, and raised $100,000 to fund a proposed legal fight against Wal-Mart's decision to deal only with the principals of their suppliers.

These mark the second round of efforts by reps in six years to force Wal-Mart to back off from its now decade-long efforts to persuade manufacturers to bypass reps and deal directly with the chain.

In late 1986, a number of rep firms in the automotive aftermarket waged a losing public relations campaign against Wal-Mart. Now, however, Wal-Mart deals directly with automotives suppliers.

OMR lost the public relations fight, however, and Wal-Mart now deals directly with automotives suppliers. OMR is defunct.

Reps will lose again unless they go to court, along the lines of the Fingerhut lawsuit, predicted Jack Springer, president of the National Association of General Merchandise Reps, Chicago. The NAGMR represents about 6,000 hard goods reps who work for 200 member firms.

"The FFFE will fight in court this time, instead of in the press," Springer predicted.

In a controversial letter dated Nov. 6, Wal-Mart president David Glass notified vendors that it intends to deal only directly with its suppliers, rather than through reps.

Wal-Mart buyers are refusing to see any reps at its Bentonville, Ark., headquarters, Springer said.

Bob Schwarze, president of the NFBA, said that Wal-Mart buyers, although officially barred from dealing with reps, are still phoning them when they need help getting merchandise.

The FFFE has retained the same Minneapolis lawyer, Galen Watje, who represented reps for Hoover and Oster when Fingerhut similarly notified vendors in 1988 that it would deal only directly, rather than through reps.

Last August, Fingerhut, a mail-order concern, settled for an undisclosed amount a lawsuit that Watje filed in a Minnesota state court and resumed dealing with Hoover and Oster through their independent reps.

Hoover and Oster deal directly with Wal-Mart and other major accounts but use independent reps to call on smaller customers.

Because the Fingerhut case was settled, the issue raised was never adjudicated, and another suit brought on the same grounds would have to be fought all again, Springer said.

In addition to considering legal action, FFFE intends to undertake a publicity campaign against Wal-Mart with some of the money it raised.

"Friends For Free Enterprise will be taking its message to manufacturers, retailers, consumers, elected officials - anyone who will listen," the fledging coalition said in a press statement. "If needed, the organization is prepared to help reps and brokers take their message to the courts," the statement added.

About 526,000 Americans make their living as independent reps, the 1990 Census determined.

Wal-Mart declined to grant a separate interview to DSN regarding its new policy. Instead, it submitted an Arkansas Democrat-Gazette article reporting on an interview Glass gave to a business writer to be used to answer questions.

Defending his new policy, Glass told the business reporter that it would benefit both Wal-Mart and the manufacturers by eliminating seasonal swings and providing more stability. That would give Wal-Mart an off-season buying break, the article stated.

"There have been some insinuations that we are after the representative's commission," Glass said. "That is not true."

On Wal-Mart sized orders, reps commissions typically are 2% of sales, said Springer. A retailer would violate federal anti-trust law if it asked for a lower price in lieu of paying a sales commission, claimed Ray Hall, president of the Electronics Representative Association, Chicago.

"Because of our growth and insatiable appetite for merchandise," Glass reportedly said, "we need to sit down with the manufacturers directly. That can't always be effectively done with an intermediary.

"If we need 40% more of a product next year, we need to sit down with the manufacturer and explain to him what's going on so he can plan," Glass told the reporter.

Glass took the same position in questioning following a talk he gave at a seminar last month sponsored by the Greater Dallas Chamber of Commerce.