Blog #3: Discounters Owe Schwegmann a Deep Debt of Gratitude

Every discounter in business today—brick-and-mortar storeowner and online seller alike—owes a deep and long-past-due debt of gratitude to John G. Schwegmann, the greatest foe of price fixing and most courageous champion of discounting the postwar world has ever seen. For through his tireless advocacy, fierce and tenacious court battles, and key victories won on behalf of legalized discounting, he played a heroic and—dare I say it—indispensable role in forging the modern U.S. consumer economy.

Unbelievable as it may seem, not so long ago it was mostly illegal in the United States to discount prices below a certain threshold set by manufacturers. This violently anti-competitive state of affairs held sway for nearly a generation—from the early 1930s to the late 1950s—before being widely recognized as a travesty of free-enterprise principles. Even then, the legal scaffolding upholding this atrocious approach to price realization remained standing until as late as 1975, when it was finally demolished by the Consumer Protection Act.

While over this benighted age most retailers cravenly caved to the dictates of the powerful price fixers, from the moment he opened his first supermarket John Schwegmann came out swinging. He for one refused to suffer such an affront to the competitive spirit that had made his country great. Hence commenced a career-long mortal struggle against the monstrous body of price-fixing acts and statutes then known as “fair trade” laws. In one particularly ferocious fight—a U.S. Supreme Court battle he won in 1951—this latter-day St. George delivered a near-deathblow to the fair trade dragon. From that point on, this Creature from the Great Depression limped slowly but surely into oblivion.

Is it too much of a stretch to claim that John Schwegmann’s brave and determined efforts helped the United States win the Cold War against the Soviet Union? Perhaps. But what must be recognized is that an economic system based on manufacturer-decreed pricing set from on high resembles more totalitarian communism than free-market capitalism. Were it not for John’s key victory over fair trade laws, who can tell just when U.S. retail competition would have been freed from the chokehold of vertical price mandates?

As it happened, Schwegmann’s Supreme Court win came early in the Cold War, in 1951, allowing ample time to develop the true weapon used to defeat the Soviet Union. No, it was not so much nuclear bombs as the prosperity of a discount-based consumer society that actually won the Cold War.

So considering all this, why has John Schwegmann’s not insignificant role in creating conditions for the triumph of the U.S. postwar economy been so totally ignored? One possible reason is that John’s memory opens old wounds in the body politic. The Great Depression was devastating—not just in terms of money and property but in its crushing effects on small town and urban neighborhood cultural values. Under attack from such destructive forces, many politicians and businesspeople, acting in desperation, came to embrace the odious fair trade laws, which were not just anticompetitive but violated the very basis of private contractual agreements.

Now that these laws are for the most part dead and gone, few want to revisit them. Best to forget a time when conservatives vilified big business and liberals valorized monopoly power; better to sweep under the rug a thirty-year period that exposes a major disjuncture in the popular historical narrative of America as having always represented the quintessence of a free-enterprise society.

Speculating along these same lines, another possibility suggests itself regarding the general failure to acknowledge Schwegmann’s contributions to the evolution of consumer society. The very same politicians, businesspeople, and historians who apparently prefer not to remember a particularly embarrassing thirty-year period from the past—there is not even a decent Wikipedia entry on fair trade laws, for God’s sake—also appear reluctant to resurrect an ideal that John championed: namely, the crossover of economic consumer to political citizen.

Early in his retail career, Schwegmann realized that it would take an activist army of consumers to check the power of manufacturers. He thus did his utmost to engage his customers in what he wanted them to realize was essentially a war, with battlefronts in both the legislature and the courts. John himself would lead the charge.

Today this notion of economic consumer as political actor is repressed. Possessing little awareness of the eternal conflict between the greed of the seller and the need of the buyer, the contemporary consumer mostly surrenders to playing only a passive role in the trade/exchange process. John Schwegmann was having none of this. His relentless advocacy against fixed prices and in favor of discounting empowered his customers. They joined him in his petition drives and statehouse demonstrations against unfair pricing.

Although John’s fair trade opponents—some of the world’s greatest consumer product manufacturers—ultimately benefited from his discount activism, they never quite forgave him for his victories won against them. Moreover, they have worked hard to sever the vital link he made between consumer and citizen. Likely for these reasons, as well as the political embarrassments discussed above, memories of John Schwegmann’s discount price crusade have until now been suppressed.