The Great A and P and the Struggle for Small Business in America Part 2

17.

DEFYING DEATH.

For the first time since winning his congressional seat in 1928, Patman faced serious opposition in the July 1938 Democratic primary. He blamed the opposition on chain-store interests, but there was more to the story. Democrats in Texas, and in other parts of the country, had finally split over the New Deal, and conservative Democrats took on Roosevelt supporters in many of that year's primary races. In Texarkana, though, Roosevelt remained highly popular. Patman portrayed himself as Roosevelt's man, and his opponents made hay when the president failed to stop in the district on his train trip to California in early July. "This has reached the point I earnestly urge you to send me telegram of some sort as primary only few days off," Patman telegraphed to Roosevelt in San Francisco on July 15. A frantic telegram to Marvin McIntyre, Roosevelt's secretary, followed the next morning. Roosevelt, about to embark on a Pacific cruise, evidently had no desire to become entangled with the volatile congressman. Patman heard back from McIntyre, not Roosevelt: "The president asked me to wire you and express his regret that he could not come to Texarkana on his trip across Texas." Patman used McIntyre's tepid telegram as best he could, issuing a press release: "President Roosevelt Wires Personal Regards to Congressman Patman."1 Patman won his primary, and immediately made known his desire to replace a defeated Texas congressman on the House Ways and Means Committee. The position was much coveted, for the committee had jurisdiction over all tax matters, including the chain-store tax bill. Patman's Texas colleague Sam Rayburn, the House majority leader, controlled the appointment. Another Texas congressman also wanted the job, and Rayburn advised Patman to seek support from other members of the state's delegation. Patman did so aggressively, writing to his colleagues, their supporters, and their local newspaper publishers. "It is very probable I will be a member of the Ways and Means Committee," Patman wrote to a supporter in September. But there were problems. Several Texas congressmen strongly opposed the chain-store tax and refused their support. "It looks like the chains are trying to block my selection," Patman wrote to the head of the Texas Wholesale Grocers' a.s.sociation in late October. Rayburn urged him to seek out Vice President John Nance Garner, another Texan and former Speaker of the House, who by this point had broken with Roosevelt and favored more conservative policies. "Dear Sam: I am not going to see Mr. Garner," Patman rejoined. At the start of 1939, Rayburn and William Bankhead, the Speaker of the House, sent Patman a blunt rejection letter expressing "our desire that you not further consider becoming a member of the Committee on Ways and Means but remain a member of the Committee on Banking and Currency."2 Someone more skilled in reading signals might have drawn certain conclusions from Roosevelt's studied avoidance, Rayburn's hesitation, and Bankhead's remoteness. These men, occupying high positions in the national government, faced serious worries in 1938. In Europe, an aggressively expansionist Germany was swallowing Austria, threatening Czechoslovakia, and resorting to increasingly violent repression at home. In China, j.a.pan was waging full-scale war. In the United States, labor unrest was rife, and overcoming isolationist sentiment to rebuild U.S. military strength was becoming the administration's highest priority. Confronted with such weighty issues, Roosevelt and the congressional leadership must have viewed Patman's high-profile chain-store crusade as a nuisance. The chain-store debate even influenced a congressional investigation of n.a.z.i influence peddling when the Texas congressman Martin Dies, head of the Committee on Un-American Activities as well as an ardent foe of food chains, went after Carl Byoir for a.s.sociating with a purported n.a.z.i propagandist.3 Patman refused to desist. He had pushed the veterans' bonus bill through Congress against the wishes of the leadership in 1935, and he planned to repeat the trick with the chain-store tax. In late July, he asked the clerk of the House to a.s.sign his bill the number H.R. 1 in the Congress that was to convene in January 1939, the better to promote it. And he laid new plans to go after George and John Hartford. In late September 1938, a few days after A&P's loud newspaper blast against the chain-store tax, he asked the Department of Justice to investigate the truth of A&P's advertis.e.m.e.nt and to gather information about the Hartfords' tax payments. In November, after voters in Colorado overwhelmingly refused to repeal their state's tax on chain stores, Patman wrote to Roosevelt suggesting a compromise: "Let A&P keep their fifteen thousand stores and the others the number of retail outlets they now own, but make the prohibitive tax apply to additional outlets. This will not be as drastic as my proposal and I believe will satisfy ninety-eight per cent of the small business men of the country." Roosevelt responded with a cold thank-you.4 * * *

The November 1938 elections brought sweeping change to Congress. The economy had slumped back into recession in 1937, seriously denting Roosevelt's popularity, and the president's controversial plan to add administration-friendly justices to the U.S. Supreme Court turned many old allies against him. Roosevelt's decision to back liberal insurgents against some Democrats who had opposed parts of the New Deal program exacerbated the split in his party. Although the Democrats retained majorities in both houses of Congress, eighty-one seats in the House of Representatives shifted into the Republican column. Of the seventy-five legislators who had co-sponsored the chain-store tax bill in February 1938, twenty-five did not return to Congress in 1939.5 Patman's tax bill was reintroduced in January as H.R. 1, but it faced opposition as never before. At year's end, Ralph Sharbrough, head of A&P's research department, told the American Statistical a.s.sociation's annual meeting that "proponents of chain store taxes have resorted to the use of half-truths and distorted reports and figures." Two days later, John A. Hartford granted an interview in which he criticized "punitive" taxation. These public statements were part of Byoir's master plan. So were new endors.e.m.e.nts. Business Organization Inc. had sent out feelers to farm interests, reminding them that A&P had often staged large-scale promotions to help dispose of surplus produce. They responded promptly: two farm groups that often disagreed on political matters, the American Farm Bureau Federation and the National Grange, pa.s.sed resolutions in November 1938 opposing "discriminatory and punitive taxes." The National Drainage, Levee, and Irrigation a.s.sociation, an existing organization, was transformed into a secret A&P front, receiving money in return for opposing the chain-store tax.6 Real-estate groups joined the anti-tax campaign as well. Along with its monthly rent checks, A&P enclosed letters urging landlords to consider the effects of the chain-store tax on their businesses. Patman spoke before the National a.s.sociation of Real Estate Boards in October 1938, arguing that the chain tax would benefit property owners, but-thanks to spadework by Byoir-the group adopted a resolution declaring that Patman's bill would dislocate the real-estate market. Byoir also created a front group, Business Property Owners Inc., to oppose the bill. "So secret was the sponsorship by A&P of this group that bankers and employees in A&P field offices found it necessary to write to Headquarters to ascertain the views of the Company as to this organization," government lawyers later claimed.7 Byoir left no stone unturned. After A&P published its "Statement of Public Policy," he collected the ensuing press commentary and mailed it off to newspaper publishers to drum up yet more commentary. His agency sent a weekly packet of news articles, including a financial column and photographs suitable for publication, to newspapers around the country. In January 1939, he put out a press release a.s.serting that anti-chain agitation actually helped chain stores by reminding the public of chains' low prices. In February, his contacts encouraged the West Virginia Horticultural Society to speak out against the bill. Byoir invited Roosevelt's press secretary, Stephen Early, to join him for golf in Florida and asked him to bring along Pat Harrison, the Mississippi Democrat who chaired the Senate Finance Committee, whom Byoir did not know. Early could not come, but Harrison, whose committee would have jurisdiction over the chain-store tax bill should it pa.s.s the House, golfed with A&P's political strategist in Palm Beach. And quite separate from Byoir's efforts, 135 chain-store operators, not including A&P, financed a national advertising campaign against the Patman bill. Meanwhile, Postmaster General James A. Farley, long Roosevelt's key adviser on matters of politics and patronage, was rumored to be considering a lucrative offer to become a lobbyist for a large chain-store operator; the firm in question is unknown.8 * * *

On March 29, 1939, in the midst of this intense maneuvering, Caruthers Ewing, A&P's general counsel, received an unexpected telephone call. The caller was William Sirovich, a New York physician, playwright, and banker who was serving his sixth term as a U.S. representative from New York City. Sirovich, a longtime friend of Ewing's and also of Franklin Roosevelt's, told him of a recent conversation with Roosevelt. The president said his son Elliott wanted to borrow $200,000 in order to purchase a radio station. Roosevelt thought that Sirovich's friend Ewing could probably approach the Hartford brothers about such a loan. "Why doesn't he go to a bank?" Ewing asked. Elliott's securities were not suitable collateral for a bank loan, Sirovich responded, but they were worth $750,000. Ewing immediately transmitted the request to the Hartfords.9 George Hartford was unwilling to lend money to anyone. John, however, was attuned to the political implications, and he told Ewing it was unfair for Elliott to be handicapped by being the president's son. With the intermediation of G. Hall Roosevelt, the brother of Elliott's mother, Eleanor, Elliott Roosevelt was invited to John Hartford's apartment at the Plaza Hotel. Hartford asked whether his father knew of the loan and said he would not make it without the president's approval. "Let's get dad on the telephone," Elliott responded, and placed a call to Franklin Roosevelt in Warm Springs, Georgia. After some preliminary conversation Elliott handed the receiver to Hartford, who had never met Franklin Roosevelt. "I said, 'h.e.l.lo, Mr. President,' and I heard a familiar voice, a voice I had heard over the radio many times, said, 'h.e.l.lo, John,'" Hartford recalled later. "I then told him that Elliott was in my apartment and asked him what did he think about this $200,000 loan Elliott wanted to make in connection with the radio business and the President said that he was entirely familiar with it, that it looked good and gave a.s.surance to me that it was a sound business proposition and a fine thing." No one said anything about A&P, John continued, but "after the President was so enthusiastic about it I felt that I was on the spot and I had to make a decision right then and there and I did not want to do anything to incur the enmity of the President." He agreed to the loan, which was secured by two thousand shares of stock in the radio venture, Texas State Network Inc.10 The entire episode would have remained a closely guarded secret had Elliott been reliable about paying his debts. He was not. At the end of 1941, with Elliott serving as a brigadier general in the Army and the radio stations struggling, Franklin Roosevelt asked Jesse Jones, head of the Reconstruction Finance Corporation, a huge government financing agency, to meet with Elliott's creditors. Jones called Ewing to say "the Roosevelt family" wished to settle Elliott's debt. He discussed the matter with John Hartford on December 31, 1941. Hartford, according to Jones, said the money was insignificant to him, as 90 percent of his income went for taxes, and added that he did not want Elliott's notes in his estate. They met again in March, when Hartford agreed to Jones's offer to settle the debt for two cents on the dollar. A few days later, Jones handed Caruthers Ewing a $4,000 check; Ewing thereupon took a scissors and cut up the notes to excise John Hartford's name. Hartford claimed a $196,000 income tax deduction for his loss on Elliott Roosevelt's debt. The deduction was upheld by a federal tax examiner.11 Elliott Roosevelt's loan from John A. Hartford came to light only in June 1945, after Franklin Roosevelt's death. The House Ways and Means Committee looked into the matter that summer, collecting affidavits and testimony from Hartford and other creditors as well as Ewing and Elliott Roosevelt. It turned up no evidence supporting gossip that Elliott had used his station to support chain retailing, nor to back up Wright Patman's claim that Hartford wanted to use Elliott's twenty-five-station radio network to push for repeal of the chain-store tax in Texas. The Democratic majority found that Hartford was probably ent.i.tled to his $196,000 tax deduction. The Republican minority objected, futilely, that if the loan represented a loss to John Hartford, then it must represent a gain to Elliott Roosevelt and should be taxed. The question of whether the loan was, in the words of The Washington Post, "a highly satisfactory investment in White House good will" has never been clarified.12 * * *

By February 1939, the press was speculating that Patman's tax bill would not even come up for a vote. The North Carolina congressman Robert Doughton, the chairman of the Ways and Means Committee, declined to schedule a hearing. Roosevelt remained studiously disinterested, declining an invitation from the National a.s.sociation of Retail Grocers to endorse its "trade independent" campaign. When he spoke on May 22 to the American Retail Federation, the group Patman had investigated in 1935, he said not a word about chain stores or the tax bill, despite Patman's pleas; Patman thought Roosevelt's friendliness to the group might be related to the fact that his son John worked for the federation's president, Louis E. Kirstein, vice president of Filene's department store in Boston. Two days later, Roosevelt quashed a Patman-supported bill to let manufacturers fix retail prices in the District of Columbia.13 As the economy revived, the steam was going out of the anti-chain campaign. A Fortune magazine survey in February 1939 found 47.9 percent of respondents opposing further regulation of chain stores and only 6.3 percent wanting to put chains out of business. "Independents aren't howling for chain scalps the way they once did," Business Week reported. Legislative defeats of state anti-chain measures, favorable court decisions, and moves to repeal existing state and local chain-store taxes were publicized as evidence that the tide had turned. Yet opposition to chain retailing was by no means dead. More chain-tax bills were introduced in state legislatures in 1939 than in any year since 1935. New state taxes were enacted in Montana and North Carolina, and new munic.i.p.al taxes in Georgia, North and South Carolina, and Virginia. Most important of all, on September 22 the U.S. Court of Appeals upheld the Federal Trade Commission's finding that A&P had violated the Robinson-Patman Act by demanding discounts and brokerage fees from its suppliers. By refusing to purchase from suppliers that would not give it discounts, the unanimous court said, A&P "injured compet.i.tion."14 Patman pressed his case, reaching an agreement with Doughton and Sam Rayburn on June 7 that the Ways and Means Committee would hold hearings on the chain-tax bill early in 1940. Five weeks later, on July 16, a group called the Independent Business and Professional Men, comprising delegates from around the country, met in Washington to urge action against the chains. Fewer than a hundred delegates showed up for the Sunday cruise down the Potomac River to Fort Washington, and even fewer were at the Willard Hotel on Monday to endorse the Patman tax bill. "It was poorly organized and poorly handled all the way through," recorded a spy who attended. Although speakers called for building a $2.5 million war chest to fight for the chain-store tax, delegates pledged only $4,500. The main organizer of the fiasco was the author and lecturer Charles Daughters, who had started the Freedom of Opportunity Foundation to sell his 1937 book, Wells of Discontent, as well as to fight chain stores. Seeing that his putative supporters among the Independent Business and Professional Men failed to provide funding, Daughters came up with an even more unlikely approach, proposing to hire an a.s.sociate of Byoir's to raise money for the cause Byoir was opposing.15 Keeping the anti-chain movement going fell to Patman himself. He likely had a hand in dumping the inept Daughters, for on September 15 he circulated a letter, on his official letterhead, stating that the Freedom of Opportunity Foundation was being run by the former Minnesota governor Theodore Christianson and that "Mr. Charles G. Daughters is no longer connected with this movement so far as I am concerned." A few weeks later, he urged George Schulte, editor of the anti-chain organ Interstate Merchant, to attack the U.S. Department of Agriculture for being too cozy with the food chains. But in the changed political climate, longtime friends of independent merchants, such as the Kansas senator Arthur Capper, shied away from Patman's tax bill. Patman was so worried that Doughton would renege on the promised Ways and Means Committee hearing that in November he asked Roosevelt to intervene, antagonizing both Roosevelt and Doughton in the process.16 In an increasingly desperate search for congressional votes, Patman revised his bill in January 1940. The tax rates on chains were cut in half. Companies operating fifty or fewer stores within a hundred miles of a single city were exempted altogether. The provision multiplying the per-store tax by the number of states in which a chain operated was suspended for seven years-but only if the chain agreed not to open new stores or relocate old ones. Patman presented this as a milder, less onerous bill, but it would still have cost A&P, which had around nine thousand stores at the start of 1940, nearly $200 million a year, eleven times annual profits. As one critic jibed, "Cutting the tax rate in half had about the same practical effect as reducing the prison sentence of a convict from 998 years to 499 years." No votes were swayed.17 * * *

The long-awaited hearings on the chain-store tax bill were an anticlimax. After Patman threatened to force his bill to the House floor with a discharge pet.i.tion-the same technique he had used to win a vote on the veterans' bonus bill-Doughton created a seven-member subcommittee to hold hearings. He pointedly included no legislators from the South or the West, the regions where anti-chain sentiment ran strongest.

One after another, representatives of the groups so carefully cultivated by Carl Byoir came to Capitol Hill to testify against a bill that, a few years earlier, many of them would have endorsed. State labor federations in places with strong anti-chain movements, such as Texas and Louisiana, now opposed the federal chain-store tax. So did the International Typographical Union, whose members did A&P's printing. "Ma.s.s production methods are here to stay as long as consumers demand them," said Patrick Gorman of the Amalgamated Meat Cutters' union, adding that sixty-three hundred of the ninety-four hundred A&P butchers now belonged to his union. Matthew Speedie of the Retail Clerks a.s.sociation praised chain stores while criticizing "unsanitary and uninviting" mom-and-pop stores, which "const.i.tute a menace to the retail industry, because they divert a certain part of the trade from other merchants and operate without profit." Edward O'Neal of the American Farm Bureau testified that the chain-store tax would force up food prices and thereby limit consumption, reducing farmers' potential sales. The National Council of Farmer Cooperatives opposed the scheme, and so, at the other end of the political spectrum, did the National a.s.sociation of Manufacturers. Consumer groups also appeared in force, with Harriet R. Howe of the American Home Economics a.s.sociation and Caroline Ware, speaking for the American a.s.sociation of University Women, criticizing Patman's tax for raising shoppers' costs.18 With the chain-store tax headed for certain defeat, the Roosevelt administration finally showed its hand. "We think it would be unwise and unnecessary to give up the economies which have been brought about by chain store distribution," Agriculture Secretary Henry Wallace wrote to Doughton in opposition. The Commerce Department's Business Advisory Council opposed the bill because "it kills efficiency in distribution and encourages inefficiency," and Edward J. n.o.ble, the acting secretary of commerce, echoed the advisory council's views. The Treasury Department's tax office deemed the bill unconst.i.tutional. Patman met with Thurman Arnold, the a.s.sistant attorney general for ant.i.trust, to solicit support, but Arnold opposed the tax bill. The Federal Trade Commission, which had aggressively investigated A&P two years earlier for violating the Robinson-Patman Act, declined to endorse the tax, suddenly discovering that it lacked up-to-date information about chain stores. Sam Rayburn, who had tolerated his fellow Texan's anti-chain efforts for years, now steered clear; the mail from his const.i.tuents in rural northern Texas ran heavily against the tax. In desperation, Patman sought the support of the retired Supreme Court justice Louis Brandeis, a critic of big business since the turn of the century. Brandeis, then eighty-three, responded with a friendly letter carefully worded to avoid an endors.e.m.e.nt.19 In the second week of May, as the hearings ground to a close, Patman made a last-ditch effort to save his bill. For eight consecutive nights, he held forth on the Columbia Broadcasting System, arguing his case to radio listeners nationwide. Moving from the book of Genesis to Leonardo da Vinci to the American farmer, he returned again and again to the idea that the independent merchant was the nation's bulwark against monopoly. The following week, on the NBC Blue Network, he went even further. "We, the American people, want no part of monopolistic dictatorship in either our American government or in our American business," he said. "Think of Hitler. Think of Stalin. Think of Mussolini. Let's keep Hitler's methods of government and business in Europe."20 Such inflated rhetoric did not serve Patman's cause. Nor did Patman's last-minute attacks on Byoir on the House floor and then on a national radio broadcast, in which he referred to the A&P strategist as. .h.i.tler's "first agent" in the United States and suggested that he had disclosed military mobilization plans to Germany. On June 18, the Ways and Means subcommittee, headed by the Ma.s.sachusetts Democrat John W. McCormack, refused to report out the bill to the full committee, effectively killing it. If fear of monopoly justified legislation, McCormack said, "such legislation should be of a regulatory nature and not punitive through the exercise of the taxing power."21 As a political movement, the anti-chain campaign was dead. Political scientists have speculated ever since about the reasons for its demise. Some point to the movement's lack of leadership. Others emphasize the difficulty of maintaining a coalition of small, widely dispersed merchants with very diverse interests. Some find explanations in the economic recovery that drove unemployment in 1940 to the lowest rate in nine years, or in the evident rise in wage levels, or simply in Americans' increasing familiarity with chains. Whatever the case, a cause that had burned fiercely for years no longer resonated in 1940.

Yet seen in another way, the anti-chain movement was a remarkable success. Against long odds, it held back the chain-store tide, withstanding pressure from Wall Street and big business to preserve the livelihoods of hundreds of thousands of people engaged in wholesaling and retailing. In 1929, before the start of the Great Depression, 1.4 million Americans ran family-owned retail stores, nearly one-third of them in the food line. A decade later, the ranks of small merchants had swelled to 1.6 million, and there were more mom-and-pop grocers than ever (Table 3). Independent grocers' share of the nation's food sales, 66 percent in 1939, declined only two percentage points over the decade. The number of wholesale establishments rose 19 percent during those years-and the number of unincorporated wholesalers, the small firms that gained the most from restraints on chain retailing, rose even faster. If their cause was to preserve opportunity for the independent merchant, the warriors of the anti-chain-store crusade succeeded beyond all expectation.22 This job preservation came at a cost: through the 1930s, the distribution of grocery-store products became more, not less, of a burden on the economy. One measure of that burden was the gross margin of partic.i.p.ants in the grocery distribution chain-the difference between the price they paid for their goods and the price at which they sold them. In the retailing of manufactured foods, non-manufactured foods, and cleaning supplies, gross margins were far wider in 1939 than they had been in 1929, an indication that grocery stores had become less rather than more efficient. Much the same was true of food wholesalers. In 1929, shoppers buying non-manufactured foods such as produce paid 47.9 percent more than the amount received by farmers. By 1939, with chain retailers restrained from cutting prices and more mom-and-pop stores in business than ever before, that margin widened to 58.5 percent.23 To be sure, mom and pop were not getting rich. In the food trade, the largest single slice of retailing, the ranks of independent merchants included 179,335 keepers of traditional grocery stores, with average sales of about $8,000 in 1939, and 166,276 proprietors of combination stores selling an average of $20,255. These businesses were tiny even by the standards of the time: the average chain-owned combination store had five times the sales of the average independent store. But no matter how marginal they were in economic terms, these independent stores sustained millions of people during the U.S. economy's most difficult decade, when jobs of any sort were hard to come by. In that sense, the opponents of chain retailing could justifiably claim victory. And despite their political weakness, they were not done fighting.

18.

THE FOURTH REVOLUTION.

By the end of the 1930s, fifteen years of attacks and investigations had left their mark on the Great Atlantic & Pacific. A&P remained the world's largest retailer by far, but it operated under a microscope. Although the NRA's price restraints had been overturned and the federal chain-store tax defeated, the Robinson-Patman Act was in full force, complicating the company's efforts to command discounts from suppliers and to use profits from its factories to hold down prices in its stores. At the state level, chain-store taxes and "fair trade" laws requiring uniform prices and minimum markups played havoc with the most routine business decisions. A Kansas official visited a store in Kansas City to buy three packages of coffee for forty-nine cents, then purchased the same brand in Topeka at three packages for fifty-three cents to accuse A&P of illegal price disparities. A county attorney threatened to arrest the manager of a new supermarket in St. Paul for having prices below those in other A&P stores. A regional circular advertising Waldorf tissue at five boxes for nineteen cents had to be withdrawn because that price, legal in Indiana, where the circular was printed, was illegally low at stores across the state line in Ohio. The wholesale price of Sparkle gelatin from A&P's Quaker Maid factories, 3.035 cents per package, was too high to resell at three for ten cents once Arizona's state-mandated markup was factored in, but Quaker Maid refused to reduce the wholesale price a few hundredths of a cent per package lest sales from one A&P division to another be deemed too cheap.1 Such legal a.s.saults contributed to a sharp drop in profitability. In 1937, George Hartford was forced to abandon the cherished $7-per-share dividend because profits were too small to cover the cost. Even after doubling since that low point, A&P's after-tax earnings remained far lower than they had been a decade earlier. In 1939, which saw the best performance in six years, earnings per share of the company's stock were down 42 percent from their peak. At the start of the decade, investors had scrambled to buy five or ten nonvoting shares whenever employees were willing to sell on the New York Curb Exchange, but now, according to Barron's, A&P was "a stock that has lagged far behind the average." Shares that had changed hands for $260 in 1930 could be had for as little as $36. The Hartfords even offered to repurchase shares from employees who had invested with great enthusiasm in the late 1920s and had seen the value of their holdings collapse.2 For a company listed on the stock exchange, owned by impatient investors demanding increased dividends and a higher share price, such performance would have been disastrous. George and John Hartford, however, controlled all of A&P's voting shares, and they had no need to answer to anyone. They could do as they pleased. They stuck with the strategy they had finally agreed upon in early 1937, closing older, smaller stores and opening supermarkets. In 1937, when A&P had been stripped of almost all its cost advantages, 44 percent of its retail outlets had lost money. By February 1940, after 5,950 store closures in three years, the proportion of "red-ink" stores was below 18 percent and headed into single digits. In place of these outmoded stores, where wages and operating expenses ate up 17 percent of every dollar of sales, A&P rapidly rolled out supermarkets where expenses took less than twelve cents per dollar of sales. Its new stores lacked the flash of independent compet.i.tors' stores; as Fortune magazine described matters, "A&P's entries in the field are like wrens in a flock of noisy parakeets." But those wrens proved to be extremely profitable. Three years after the start of A&P's transformation, supermarkets accounted for half the company's profits.3 * * *

The supermarket was a shock to the tens of thousands of longtime employees at A&P. When A&P had begun to shift from traditional grocery stores to combination stores in the late 1920s, the main changes at store level had been the installation of meat counters and the employment of butchers. Outlets had relocated to slightly bigger premises gradually, over a period of many years, but the work of store clerks and store managers barely changed. The shift from combination store to supermarket was far more abrupt. A full-service combination store, of which A&P still had thousands, might occupy a s.p.a.ce twenty-five feet wide and fifty feet deep on the ground floor of a narrow building. New supermarkets were four or five times as large. A combination store, on average, had sales of $1,400 a week at the start of 1940. New supermarkets were expected to have weekly sales of $10,000 or more. Fixtures, displays, lighting, and even scents were carefully thought out to attract more prosperous shoppers. Employees' jobs changed, too. Clerks were no longer meant to chat with customers, pick their purchases off the shelves, and ring up the sale; now supermarket stock clerks-largely male-specialized in moving boxes and keeping the shelves filled, without disturbing shoppers, while checkout clerks-mostly female-were more like a.s.sembly-line workers, serving unending queues of customers. The shrinking store count meant that many erstwhile store managers no longer managed, and those who remained had so many employees to oversee and so many items to keep in stock that they rarely labored alongside their clerks, as they had in the past. Even high-ranking executives had difficulty adjusting to these changes. At the end of 1938, as he was pressing his staff to open more supermarkets, the head of the New England Division asked all workers to make sure "no customer is allowed to leave our stores until at least one item has been suggested"-a demand for just the sort of face-to-face contact the supermarket was intended to eliminate.4 A&P's vast manufacturing and distribution system was well suited to keeping these large new stores stocked at favorable prices. Due to the Robinson-Patman Act, A&P could not buy branded goods from outside producers for less than its compet.i.tors paid, except where it could justify volume discounts. But its factories and bakeries gave it brands other retailers could not offer. If it organized orders properly, those plants could operate steadily near maximum capacity, driving down the cost of producing each can of green beans and each loaf of bread. With demonstrably lower production costs, A&P's factories could set their wholesale prices below those of outside suppliers, allowing the retail stores to price below the compet.i.tion without running afoul of the law. So important was in-house manufacturing that A&P set up a merchandising committee in late 1938 to find ways to get more of its own products into its growing number of supermarkets. "A&P products are the largest single source of profits which A&P has," the committee agreed. "To increase these profits is our one aim."5 Supermarkets had far larger produce sections than the combination stores they replaced, giving the Atlantic Commission Company, A&P's produce wholesaler, a critical role in the business. Atlantic Commission was controversial, because by the standards of the fragmented produce trade it was an extremely large operation, handling 9 percent of U.S. shipments of fresh fruits and vegetables in 1940. Most produce in those days was sold through local grower a.s.sociations; when an area's pea harvest or plum crop came in, individual farmers would haul their output to the a.s.sociation's warehouse, where it would be auctioned to specialized brokers. The brokers, in turn, would move the produce in smaller lots through wholesale markets in major cities. Atlantic Commission sometimes joined those auctions, but it could also circ.u.mvent them. Unlike the independent brokers, it had agents at big-city markets in addition to a hundred buying offices around the country. Their close communication enabled it to decide whether, on any given morning, Atlantic Commission would bid at the apple auction run by the Yakima Valley Growers a.s.sociation in Yakima, Washington; strike private deals with the a.s.sociation or individual apple growers; or buy nothing in Yakima and meet its requirement for apples at the market in Chicago or New York. Atlantic Commission was big enough to obtain volume discounts by purchasing dozens of railcar loads at a time and to control risks by contracting for farmers' potato harvests in Kern County, California, before the crop was even planted. Its scope and scale gave it advantages smaller brokers could not match.6 Purchasing in volume, circ.u.mventing brokers and wholesalers, and minimizing losses in transit brought lower costs: in 1940, A&P estimated that moving a box of oranges from California to a store in Jersey City would cost forty-six cents with a broker but only twelve cents through Atlantic Commission. Even allowing for exaggeration, the cost saving was huge. Atlantic Commission's marketing muscle allowed it to balance supply and demand in a way a smaller dealer could not. It could organize regional or national promotions of fruits that were in oversupply, redirect shipments to places where a commodity was scarce, and sell excess to other retailers when it had more peaches or carrots than A&P needed in a particular location. In 1941, Atlantic Commission bought up 26 percent of Maine's potato crop and organized ships to take the potatoes to ports in the South and Southeast, allowing A&P supermarkets to stock Maine potatoes in towns where they were normally unavailable. Atlantic Commission enabled A&P to gain efficiency in a highly inefficient corner of the food distribution world, filling the new supermarkets with an unprecedented array of produce from all over the country.7 The spread of supermarkets also opened new possibilities for A&P's huge bakery division. Until the late 1930s, the thirty-five bakeries served princ.i.p.ally to supply cheap sliced bread; A&P's grocery stores had neither s.p.a.ce nor equipment to sell more perishable baked goods, and the bakeries rarely produced them. The supermarkets, however, had room to display cakes, pies, and pastries attractively, a.s.suming A&P could figure out a way to deliver the goods quickly enough to keep them fresh. In 1939, A&P began to train its bakers to make cakes and pies on an industrial scale. To convince customers that the goods were as fresh as those in any bakery window, A&P wanted to display them on sheet pans rather than in packages, so its engineers developed a galvanized container to transport sheet pans safely from bakery to store. Gla.s.s display cases appeared in the supermarkets, where clerks were taught to sell and wrap baked goods. With the creation of a heavily advertised bakery brand, Jane Parker, sales took off. Retail sales of baked goods jumped 35 percent in three years, and may have accounted for half the company's profits by 1941.8 In hindsight, it is difficult to appreciate the speed with which the mammoth retailer restructured a business that operated from Florida to Alaska and Quebec to California. By the end of 1941, two-thirds of the A&P stores that had been open in 1937 no longer existed. In their place were bigger stores operating far more efficiently. While food prices rose only a few percentage points over those four years, sales at the average A&P store increased 236 percent, and the physical volume of merchandise moving through the average store nearly quadrupled. Sales per employee rose by half. With prices held constant, expenses fell by one-third in four years, relative to sales. By 1941, A&P's operating costs, per dollar of sales, were half what they had been in 1925.

The company's advance would have been even more rapid had it not heeded the counsel of Carl Byoir to slow the pace of supermarket openings. Byoir frequently partic.i.p.ated in A&P management meetings to advise on public relations. In June 1939 he warned that simultaneous supermarket openings in individual cities might "be detrimental to the company in a public relations way." The order went out from headquarters to move more slowly. Unit managers were advised to take care to avoid the perception that A&P was trying to dominate the local grocery trade anywhere.9 * * *

The supermarket was the fourth retailing revolution through which George and John Hartford had guided the Great Atlantic & Pacific. With their father, they had turned George Gilman's tea company into the first grocery-store chain in the 1890s. Starting in 1912, their Economy Store had changed the grocery trade from a haphazard enterprise of uncertain profitability into a large-scale business based on careful control of costs and prices. In 1925, the Hartfords had reorganized the company to take advantage of vertical integration and economies of scale with the aim of boosting profits by increasing volume. Now, with little ado, they brought about yet another transformation by moving quickly from the combination store to the supermarket. They were by no means the inventors of the large self-service food store. Their contribution came in figuring out how to use this new format to increase efficiency and lower costs. In the s.p.a.ce of a very few years in the late 1930s and early 1940s, A&P turned the supermarket from a wild marketing concept of uncertain profitability into the main place American families bought their food. In 1939, the first time it examined the supermarket phenomenon, the U.S. Census Bureau counted 1,660 self-service food stores with sales exceeding $250,000 per year. A&P had more stores fitting that description than all other food retailers combined.10 The numerous government investigations of A&P have left an unusually detailed picture of how the Hartfords managed their company through the 1930s, a decade of extraordinary economic and political challenges. In the tens of thousands of pages of surviving company doc.u.ments, though, George L. Hartford remains an enigma. By the second half of the 1930s-George turned seventy in 1935-his appearances at company meetings were limited to the quarterly reunions of his highest-ranking executives, such as the division presidents. Even in earlier years, the only division board meetings he attended were those of the Eastern Division, which were held at the Graybar Building; he would normally arrive at a prearranged time, speak his piece, and leave. There is no record of him traveling to company functions outside New York. The minutes of corporate meetings cite him only occasionally. When he is mentioned, his utterances either are benign generalities-"He mentioned that we were pa.s.sing through some trying times, but he felt that our company was in splendid shape to weather any storm"-or concern financial performance, the sorts of comments one might expect from a corporate treasurer, not from the chairman of the board.11 Beyond a handful of top managers, Mr. George was a distant presence to A&P employees. Few of them ever laid eyes upon him. For most, he was more a legend than a man to whom they related personally. A&P's public relations department helped burnish his image by crafting myths such as his supposed forays to taste A&P's coffee each day at two. Managers, though, seemed to feel he was out of touch. A&P had difficulty obtaining the best locations for its new supermarkets because it would not sign leases for more than five years; while compet.i.tors leased desirable parcels of land for twenty years and spent their own money to build stores, A&P would not, because George focused more on the risk of a long-term commitment to an unsuccessful store than on the growth potential. When the chairman of the Southern Division told his division president to slash prices to build business, he offered one caveat: "But there is one thing and it is most important: do not advertise a standard brand of coffee at cost, or 1 cent above cost. I think you understand that Mr. George Hartford feels very strongly against this sort of thing." His brother was not beyond using George's remoteness to advantage, insisting that policies be obeyed because George demanded it. When the president of the Middle Western Division requested John's permission in 1937 to sell below cost in Joliet, Illinois, for a single weekend in order to meet compet.i.tion, John slapped him down, responding, "I would hesitate even to bring up this matter to Mr. George."12 John A. Hartford, on the other hand, seems omnipresent in the company records. Far more vigorous than his older brother, he traveled widely, conferring with division-level boards of directors in Detroit, Boston, Pittsburgh. He visited bakeries, sat with executives of the National Meat Division, met with produce suppliers and grocery vendors. When the division presidents convened each quarter, he partic.i.p.ated from beginning to end. There was hardly a meeting at which John's thoughts were not cited, even if he was not personally in attendance. What emerges from the records is a company in which Mr. John was the driving force and Mr. George, more often than not, was manning the brake.

John, always dapper in his tailored suit and polka-dot bow tie, was A&P's public face. When speaking to the press was deemed useful, John took on the task. Internally, he represented the company to A&P's own employees. He responded personally to their letters. When headquarters wanted to communicate with store managers, whether to explain a recent labor dispute or to threaten firing of any manager alleged to have sold short weights, the communication often took the form of a personal letter from John. When he was on the road, he occasionally gathered local store and warehouse managers to meet him over dinner or at special events with the singer Kate Smith, who was featured in A&P's advertis.e.m.e.nts and radio programs. Although he often spoke in the first-person plural, representing his brother as well, to employees, it was Mr. John who personified A&P.13 But John was no front man. Since 1912, when he convinced his father and brother to let him test the Economy Store concept, he had been the company's visionary. The reorganization of 192526, in which A&P curbed its investment in manufacturing to focus on increasing sales volume in its retail stores, was largely John's achievement. The campaign against the Patman tax bill, which saved the company from annihilation, had come at his initiative, against his brother's opposition. The company's quick transition to the supermarket between 1937 and 1940 was John's doing as well, often against the resistance of his brother and longtime executives. At the same time, John was a hands-on manager with detailed knowledge of the company's business.

In principle, the brothers had removed themselves from day-to-day operating responsibilities in 1925, when they decentralized store management and manufacturing and put an experienced executive in charge of each division. The Hartford philosophy was that men should be given responsibility and left to do their jobs. "As much responsibility as possible should be thrown upon the key men as it is only in this way we discover a man's capabilities," one division president told his managers, echoing John with every word. In practice, though, John Hartford had a hand in everything, and no A&P executive, no matter how senior, made a significant decision without his knowledge. When the quarterly meeting of division presidents resolved on June 25, 1931, that no merchandise would be sold at a markup below 3 percent without the approval of the division president, it was carrying out John's wishes. When they agreed, against their better judgment, to reduce margins in stores in an attempt to sell more groceries, they did so because John wanted it done. When a truck driver sued the company, alleging injury from a knife thrown by an A&P clerk, John, according to company lore, practiced throwing knives at the distance claimed until he convinced himself that the incident could not have occurred.14 John's management style was a curious mixture of quant.i.tative a.n.a.lysis and old-fashioned paternalism. A&P was a leader when it came to finding ways to quantify performance. Its armies of office clerks collected numbers on everything, and partic.i.p.ants in management meetings pored over thick packets of figures, neatly typed on stencils and duplicated on mimeograph machines. No subject was too unimportant to be broken down by division or unit, allowing for easy comparisons. If one division or unit lagged others, the executive in charge was well-advised to come armed with a plan to fix the problem. Store managers who failed to attain sales and profit goals found themselves replaced: in 1927, a time when rapid expansion forced the company to promote large numbers of untested men to run stores, one-third of all managers were replaced in a nine-month period. Managers who met their profit goals by overcharging customers were p.r.o.ne to lose their jobs as well if detected by the company's ubiquitous auditors or by the "secret shoppers" who checked to make sure prices were posted clearly on the shelves.15 Yet John also a.s.sumed personal responsibility for people who had devoted themselves to A&P. If a manager who tried to follow company policies nonetheless failed in his job, John believed, the fault lay with the company's inadequate training; rather than being fired, he should be moved into a position to which he was better suited. Store managers who could no longer do the job due to age or physical infirmities but wanted to continue working were kept on the payroll as clerks. While his paternalism had limits-A&P hired few black workers before World War II, and female clerks and secretaries had little chance for promotion-his unwillingness to displace thousands of loyal employees was partly to blame for delaying the shift to supermarkets, which eliminated seven thousand jobs, mainly those of store managers, between 1937 and 1940.16 John's paternalism often brought him into conflict with his executives. Division managers and their subordinates, the unit managers, were meant to keep costs low, but they were to do so by careful management-finding good store locations, minimizing inventory, advertising wisely, bargaining hard with vendors. John's fervor for cost control did not extend to squeezing workers. Although very few A&P workers were represented by unions before 1938, John is often to be found urging district and unit executives to raise wages and improve benefits. During the Depression, when many employers slashed wages, the Hartfords refused to do so. Division presidents were urged to grant paid vacations, and in July 1931, John asked the Southern Division to raise clerks' wages "to make our proposition more attractive to the young men in our organization, who are really ent.i.tled to further remuneration." In 1935, he told the unit managers of the Central Western Division, in Chicago, that he was "apprehensive" of the salaries of store clerks. "He has received letters from clerks who have terminated their services with the company, in which charges have been made that their positions had been eliminated in order to make way for a new clerk at a lower wage," the division's minutes report. "He felt that the excess we earn over our dividend requirements should be thrown back into the business to further reduce our retail prices and to improve the income and working conditions of the managers, and particularly the store clerks." A year later, he wrote to the Southern Division asking that it inst.i.tute sick pay.17 Division managers often failed to heed John's advice, because raising labor costs, in the short term, lowered profits. When that occurred, John could not dictate a change in policy-he had, after all, decentralized authority-but he could embarra.s.s the local management by raising the issue again and again. After the Central Division in Pittsburgh ignored John's suggestion that it raise pay in 1935, he persisted. According to the minutes of a division board meeting in January 1936, "Mr. Hartford has brought up the subject of our low clerk salary in practically every meeting he has attended in the Central Division during the last few years, and it was humiliating to the committee for him to bring it up again. It was felt that he was justified in taking any steps he thought wise to bring about a higher wage for the clerks however it was still felt we could correct the situation." The division's board met again the following Monday and did as Mr. John had dictated, bringing average pay for full-time clerks to $17 per week. "It is hoped that Mr. Hartford will not again find it necessary to bring to our attention that we pay our clerks too little," the minutes affirmed. As A&P opened more supermarkets, he was concerned that division managers failed to appreciate that running a supermarket was far more difficult than managing a much smaller combination store, and he repeatedly urged pay raises for store managers and a.s.sistant managers. He believed "the future of this type market depends to a large extent on the personnel, and they should be compensated according to ability and achievement," the 1940 minutes of the Eastern Division record.18 Such issues were addressed in personal visits and in voluminous correspondence, all of it formal. A&P's compet.i.tors were far less starchy. At Safeway headquarters in Oakland, California, President Lingan A. Warren was p.r.o.ne to address his managers as "Dear Tom" or "Dear M.L.," and many of them wrote back to "Dear Ling." At Kroger's general offices in Cincinnati, executives frequently sent out brief memos on standard forms rather than resorting to letters. There was no such familiarity in the Graybar Building. Even an executive such as the Southern Division's chairman, O. C. Adams, who had worked with the Hartfords since 1894, was addressed as "Mr. Adams," and Adams corresponded with his subordinates in the same vein. John's courtliness was an integral part of his image, but it must have seemed very old-fashioned to new A&P employees in the late 1930s.19 Decentralization or not, John could not resist becoming involved in details. He wanted his executives to know that he knew about their businesses, and he poked his nose into everything. Auditors advised headquarters whenever they found a store selling merchandise below cost, and John personally reprimanded offenders. In 1936, after a court in Washington, D.C., found A&P guilty of selling short weights of meat, he personally signed an individual letter to each of forty-five thousand store employees warning that anyone accused of cheating customers would be fired. In March 1939, he telephoned the chairman of the Southern Division to ask about the wide margins reported by two supermarkets in Georgia. In November 1939, the Atlantic Commission Company's methods of purchasing oranges from a Florida cooperative were on his personal agenda. In 1940, he looked into large stock gains at certain stores in Virginia, which could mean that the managers were setting prices higher than the company desired. In 1941, he had an extended interchange with the president of the New England Division on the way a regional compet.i.tor accounted for depreciation. But there may be nothing that ill.u.s.trates John Hartford's management style more fully than the case of G. D. Keller.20 Keller, the former manager of A&P's store in Oberlin, Ohio, sent Hartford a three-page handwritten letter on April 16, 1939. Keller explained that he had left A&P after eleven years in a dispute with an a.s.sistant superintendent, whom he accused of having affairs with female store clerks. He had then raised the money to open his own grocery store in Oberlin, only to find that A&P had lowered prices in its store to put him out of business. "I had the pleasure of meeting you in Cleveland at Kate Smith's party and do not believe you are a man to condone such tactics," Keller wrote.

On April 19-no more than a day after receiving Keller's letter-Hartford wrote to D. F. Meier, head of the Cleveland unit, asking him to look into the situation. Meier explained that Keller had a drinking problem and that the a.s.sistant superintendent had been trying to help him. The Oberlin store was one of fifteen in the unit where prices had been cut, he said. On May 5, Hartford sent Meier's response to C. A. Brooks, president of the Central Division and Meier's boss, and asked him to investigate to make sure Keller had not been treated unfairly. Brooks wrote to Meier, then phoned him, and wrote to Hartford that the price reductions in Oberlin were not intended to hurt Keller. Hartford wrote back almost immediately, demanding the dates and store locations where prices had been cut. Brooks again wrote to Meier, who supplied more details. Hartford refused to drop the matter. He telephoned Brooks, then sent him a stern letter on June 7. "I believe in carrying out this plan of action in this store you made a very grave mistake," he wrote. "After developing this story through my correspondence with you, I feel it to be indicated that we did exactly what Mr. Keller describes in his letter." Hartford's executives knew when to grovel. "Your valued favor of the 7th received," Brooks replied to Hartford. "I agree with you that it was a mistake, and I believe unintentionally on the part of Mr. Meier." Brooks phoned Meier once more, and the unit manager paid a personal call on Keller to apologize and let him know the local A&P would be raising its prices. Only then did Hartford contact Keller directly: "I wish to take this opportunity to thank you for writing to me in this regard."21 That the president of the largest retail organization in the world would even read a three-page handwritten letter from a disgruntled former employee is remarkable enough. That he would intervene personally with high-ranking executives on four separate occasions concerning a problem at one of his company's nine thousand stores, repeatedly challenging their explanations and ultimately accepting the former employee's story over theirs, is extraordinary. But if such interventions could be humiliating for the employees concerned, they were a critical management tool. Mr. John was watching everything, or so he wanted his people to believe. And every A&P employee knew that if there was something wrong, Mr. John would try to set it right. That remarkable loyalty extended even to ex-employees such as G. D. Keller. In April 1940, a year after his first letter to John Hartford, Keller sent Hartford another handwritten note to say that business was better and he hoped soon to be out of debt. "I want to thank A&P for teaching me the grocery business," Keller wrote.22 * * *

John A. Hartford took an extremely long-term view of his family's business. For A&P executives, John's demands could be infuriating. Rather than urging higher profit margins, he often insisted on the opposite. His view that A&P should focus on return on investment rather than profits as a percentage of sales was not widely shared within the company. To his division presidents, who were overseeing thousands of stores or substantial industrial operations, a large profit, relative to sales, indicated good performance. To John, though, a large profit was a warning light, signaling an attempt to maximize short-term returns by paying workers inadequately or by holding prices too high. Either way, too much profit in the short term was bad for the company's position in the long term. As he saw it, excessive prices would reduce volume. Once that occurred, A&P would be forced to spread the fixed costs of its warehouses and factories across a smaller customer base, which would require it to raise prices even higher. No matter what the short-term implications for the bottom line, damaging A&P's reputation as the low-price grocer was a risk he was unwilling to take. In 1940, John went so far as to tell his division presidents the company should not attempt to earn more than $7 per common share; if earnings were above that, then their prices were simply too high.23 So long as it could hold down costs, A&P could undercut the compet.i.tion even under the tight legal constraints on prices. The supermarkets brought lower costs, and their lower prices brought customers flocking back. In 1940, according to the company's estimates, it captured 10 percent of the available business in the places it had stores-more than it had held before the National Industrial Recovery Act, state chain-store taxes and fair-trade laws, and the legislative efforts of Wright Patman. In Pittsburgh, where its pre-Depression market share had been around 12 percent, A&P sold 20 percent of the groceries in 1940. In Chicago, its market share climbed from 11 percent to 14 percent, in Detroit from 10 percent to 15. Perhaps, John Hartford suggested, the relentless political attacks on A&P had backfired by focusing public attention on the fact that A&P was the cheapest place to shop. Whatever the cause, A&P found itself in a virtuous circle just as he had predicted: low prices brought higher volume, and volume boosted the bottom line. A&P's pretax return on equity climbed above 15 percent in 1940 for the first time since 1933. The fourth revolution, bringing A&P quickly into the supermarket age, proved to be the company's salvation.24

19.

THE TRUSTBUSTER.

The demise of his bill to tax chain stores in June 1940 brought an end to Wright Patman's hopes of pushing anti-chain legislation through Congress. It also doomed Patman's ambitions to enter the U.S. Senate. Patman had long coveted a Senate seat, and the death of Senator Morris Sheppard in April 1941 created an opening. When he tried to rally support across his huge state, though, Patman found he lacked for friends as well as money. The flamboyant populism that endeared him to voters did not appeal to potential patrons such as Sam Rayburn, now the powerful Speaker of the House, and Franklin Roosevelt. Roosevelt's support went to a young congressman, Lyndon Johnson, who then lost to the conservative governor, W. Lee "Pappy" O'Daniel, in a fraud-ridden election. Patman, humiliated, abandoned the race and sent a pitiable missive to the Democratic Party boss, Edward J. Flynn: "Having been a loyal Administration supporter, I am hoping that I will be considered the next time a situation arises in Texas that will warrant an evaluation of my merits."1 The tax bill's crushing legislative defeat did not mean the end of the anti-chain crusade. Far from it. The cause was taken up by a most unlikely protagonist, Franklin Roosevelt's ant.i.trust chief, Thurman W. Arnold.

Arnold shared Wright Patman's small-town roots, but not much more. Born in Wyoming in 1891, Arnold had struggled through Princeton before flourishing at Harvard Law School. He opened a law practice in Chicago in 1914, handling divorces, collecting debts, and struggling to make ends meet. The call to military service was timely. In 1916, his National Guard unit was ordered to Texas to help track down the Mexican guerrilla leader Pancho Villa, and that adventure was followed by wartime service in France. Following his military career, Arnold moved back to Wyoming and won a seat in the state legislature, where he was the only Democrat. His most famous initiative involved nominating himself to be Speaker of the House, rising to second his own nomination, and then rising once more to proclaim: "Mr. Speaker, some irresponsible Democrat has put my name in nomination and I wish to withdraw it."2 In 1923, Arnold became mayor of Laramie, a city of sixty-three hundred that was home to the University of Wyoming, where he taught law. He moved east when a former Harvard Law cla.s.smate recruited him to become dean of the law school at West Virginia University. An offer to teach at Yale Law School, one of the most prestigious legal faculties in the country, came in 1930. At Yale, Arnold developed cla.s.ses on leading-edge subjects such as psychiatry and the law, and his writings made him one of the best-known professors at the school. Easily identified by his three-piece suits, his neatly trimmed mustache, and the cigar that was often between his fingers, Arnold was a colorful character with many friends in New Deal Washington. During vacations and sabbaticals from Yale, he worked in the Agricultural Adjustment Administration (whose counsel was his former Yale Law School colleague Jerome Frank), the newly established Securities and Exchange Commission (headed by his former Yale Law School colleague William O. Douglas), and the tax division of the Department of Justice. Arnold turned down appointments to the National Labor Relations Board and the Securities and Exchange Commission. "An academic seat on the Atlantic Seaboard is more to my liking than anything else I can possibly think of," he wrote to the Harvard Law professor Thomas Reed Powell in March 1938. When the offer to head the Justice Department's ant.i.trust division came in 1938, it was one he could not pa.s.s up.3 Ant.i.trust law was not Arnold's field of expertise, and his nomination brought forth protests from senators who thought him insufficiently concerned about the economic dominance of big business. His record suggested as much. At Yale, he was a.s.sociated with a group known as legal realists, who were more interested in the ends to be achieved with the law than in philosophical consistency or political ideology. Realism left him skeptical that ant.i.trust policy was an effective way to encourage compet.i.tion. He thought the ant.i.trust laws were a subterfuge, serving to "promote the growth of great industrial organizations by deflecting the attack on them into purely moral and ceremonial channels." But the worries about his commitment to activist compet.i.tion policy were unfounded. As a Westerner, Arnold shared the West's deep suspicion of eastern capital and of large, centralizing inst.i.tutions. During the five years of Arnold's tenure at the ant.i.trust division, from 1938 to 1943, it would undertake almost as many investigations of corporate power as it had since pa.s.sage of the Sherma