Reclaim Democracy!

Court Declares Corporations Are People, Some Human Beings Are Not

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By Jeffrey Kaplan
Published February 8, 2008

In evaluating allegations that U.S. military forces deprived four British men of human rights during two years they were held captive in Guantanamo Bay prison, a U.S. appeals court found an innovative way to let the Bush administration off the hook. Two of three judges ruled the men — because they are not U.S. citizens and, technically, were not imprisoned in the U.S. — were not legally “persons” and, therefore, had no rights to violate.

While those judges were defying common sense and decency by denying legal personhood to living human beings, an appeals court in Boston has been reviewing an April 2007 decision by Federal Judge Paul Barbadoro that engaged in a different form of judicial activism — granting human rights to corporations.

Barbadoro struck down a New Hampshire law that prevented pharmaceutical corporations from learning exactly what drugs doctors prescribe and how much they prescribe. The law aims to protect doctors and, indirectly, their patients, from drug companies pressuring doctors to choose their products.

The judge’s grounds? He claims corporations, as legal persons, have “free speech rights” that would be infringed by such a measure.

The real issue in these cases (Maine recently passed a similar law) isn’t free speech at all; it’s manipulation and control. The drug salespeople only will decide what to say after poking into the doctors’ prescription records. Under the guise of protecting speech, Judge Barbadoro denied both legitimate privacy rights of doctors and key protections to ensure patients are prescribed drugs based on their medical situation, not pressure applied to their physician.

Taken together, these two rulings are a perplexing and dangerous development. The founding principle of our country is right in the Declaration of Independence: all people are “endowed by their Creator with certain unalienable Rights.” It is not for judges to decide who is and who is not a human being.

Nor should the courts play Creator by endowing legal constructs like corporations with human rights. Our constitutional rights exist to prevent large, powerful institutions — whether governments, corporations, or other entities — from oppressing us humans.

For too long a strange dichotomy has persisted between many principled people on the political left and right wings. The left wing often warns against the growing power of business corporations. The right wing complains the left ignores the overweening power of the government and is “anti-business.”

Both sides have been seeing only part of the same elephant. What’s happening is a merger of corporations and state.

Already there are corporate “black holes” for human rights that rival government affronts like Guantanamo. Under the Bush administration’s legal framework for Iraq during its occupation, the Iraqi government wields no authority over Blackwater corporation’s security guards.

And it’s not clear the U.S. government does either. As a result, we may never see anyone punished for Blackwater’s wanton killing of Iraqi civilians in Baghdad last September.

Then there’s the case of Jamie Leigh Jones, an American employee of Halliburton/KBR in Iraq who claimed she was gang raped by co-workers in 2005. U.S. officials reportedly handed the evidence to KBR, whereupon the evidence apparently disappeared. Nobody in Congress, Democrat or Republican, has been able to persuade the Bush administration to reveal what it has done about the case since then.

Halliburton/KBR, like Blackwater, apparently enjoys the rights of a person, but not the responsibilities.

Editor’s note: shortly after completing this article, we learned of this shocking story: Judge Denies Allows Halliburton to Force Sexual Assault Case Out of Court

The danger of “corporate personhood” is a bit like global warming; people have warned us of the threat for decades only to go unheeded because the dire consequences seemed far-fetched.

But look at what’s happened to the First Amendment. Corporations use it to strike down laws clearly designed to protect citizens, even while courts deny prisoners the right to know what evidence the government is using against them. It’s time for alarm.

We should take offense whenever we hear the dangerous notion of “corporate citizenship” promoted. Soon, the only citizens with real power in the United States may be the corporate kind.

Jeffrey Kaplan is a researcher with ReclaimDemocracy.org, a non-profit organization working to restore citizen authority over corporations.

© 2008 ReclaimDemocracy.org

Take Action: Protect Your Right to Know the Source of Your Food

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To protect sales of synthetic hormones, Monsanto tries censorship

Published December 19, 2007
Updated January 17, 2008

Millions of Americans now seek out dairy products coming from farms that do not inject their cows with synthetic growth hormones. Some people want to ensure they are not contributing to demonstrably higher rates of sickness among animals injected with the hormones, often referred to as rBGH or rBST. Others simply want to support more natural forms of agriculture or believe there may be health risks from ingesting rBGH-derived products.

In most places, we have the freedom to choose because many companies recognize the demand for such products and increasingly are providing customers what they want. Consumers also can easily discern those products because most companies use labels to identify products from farms that do not use these artificial hormones.

All this is unobjectionable to anyone who believes in a market-based economy.

The corporation that enjoys an absolute monopoly on the product in question, however, isn’t keen on consumers making informed decisions.

The Monsanto Corporation manufactures Posilac, the only bovine growth hormone approved for sale in the U.S. Monsanto claims the increased milk yield that results from Posilac outweighs the products expense and the cost of increased rates of illness among cows that results from its use.

Faced with a growing resistance to Posilac, Monsanto is waging war on informed decision-making, lobbying state officials to ban dairies from placing factual information about rBGH on their label. Its lobbyists argue that consumers are making poorly-informed choices based on fear-mongering, necessitating government intervention to save us from being misled by alarmists.

For more than a decade, Monsanto has attempted and (mostly) failed to censor such information through lawsuits and federal lobbying efforts. Incredibly, four states — Indiana, Washington, Missouri, and Ohio — have legislative or executive efforts pending that would ban dairies from using product labels that assert they purchase only from dairies not using Posilac.

Pennsylvania actually had a ban slated to take effect on February 1, 2008, but citizen outcry led PA Governor Edward Rendell to scrap the plan just two weeks prior. A similar plan in NewJersey was abandoned in the face of strong public opposition on Jan. 4, 2008.

Regardless of anyone’s views on the utility of rBGH, citizens should be outraged at state governments censoring information that many citizens need to make decisions consistent with their values. We hope you’ll use the information below to speak out.

Take Action!

  • Ohio residents
  • Indiana residents. On January 15, 2008, Bill 1300 was introduced into the Indiana Assembly. Tell your elected officials your thoughts on censoring product information.
  • Nationwide: If you live elsewhere in the U.S., don’t wait to be put on the defensive — start educating people about potential assaults on their rights, why so many people seek out Posilac-free products (see resources linked below), and consider proactive measures like:
  • propose banning Posilac-derived products from being sold in your community or state
  • propose mandatory labeling of products that do come from synthetic hormones.

Such actions will be challenged in court and the former measure likely would be struck down in the short term. Though a federal court struck down vermont’s mandatory rBGH labeling law in 1996 in International Dairy v. Amnestoy, such a law should withstand any legal challenge if written with that goal in mind. Please contact our office for direct assistance if you consider these actions.

Information sources on Monsanto and Posilac

The Organic Consumers Association and Food and Water Watch provide a wide array of anti-rBGH information. The Environmental research Foundation hosts many articles opposing rBGH itself and indexes opposition groups and their material.

Monsanto’s press release announcing its FTC complaint is posted here (pdf). Unfortunately, the company removed its complaint letters to the FDA, the FTC and accompanying exhibits from its website sometime during Dec, 2007.

ReclaimDemocracy.org article addressing Monsanto and corporate/ government suppression of consumer information: When Silence is Not Golden: Negative Free Speech and Human Rights for Corporations by Dean Ritz

© 2007 ReclaimDemocracy.org

Wal-Mart Eyes Smaller and Higher-End Stores

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Corporation also aims to become “number one health-care company”

By Gary McWilliams
First published by the Wall St. Journal, August 17, 2007

Twelve years ago, Wal-Mart Stores Inc. executives welcomed Terry Leahy to the company’s Bentonville, Ark., headquarters. Mr. Leahy, newly promoted at Tesco PLC and considering an overhaul of the British retailer, spent an afternoon discussing operations with Wal-Mart executives.

Today, Wal-Mart is doing everything it can to stop Mr. Leahy from crashing its last big growth business: groceries. It has a team of executives hunkered down far from Bentonville in the San Francisco Bay area devising two new small-footprint stores, including a response to the November launch of Tesco’s U.S. grocery stores, according to people familiar with the group.Twelve years ago, Wal-Mart Stores Inc. executives welcomed Terry Leahy to the company’s Bentonville, Ark., headquarters. Mr. Leahy, newly promoted at Tesco PLC and considering an overhaul of the British retailer, spent an afternoon discussing operations with Wal-Mart executives.

Their brainchildren represent an unlikely step for staid Wal-Mart: One idea calls for urban convenience stores less than a tenth of the size of the company’s supercenters and stocked with groceries geared to more affluent tastes. Another plan calls for stand-alone stores offering a variety of health services and products. The new outlets are being prepared for introduction early next year, the people say.

David Wild, the Wal-Mart senior vice president of new business development, is leading the initiatives. He declined to comment. A Wal-Mart spokesman wouldn’t provide specifics but said, “Our business is constantly evolving, and we’re always looking for new and innovative ways to serve our customers.”

The company may have waited too long to develop successors to its big-box U.S. stores. Analysts now chopping their profit estimates for this and next year say Wal-Mart has seemed tone-deaf to consumer trends. Failed pushes in women’s fashions and home decor continue to sap profits, and high gasoline prices are eating into supercenter visits. Recently, Wal-Mart has tried running ads promoting its low prices as worth the extra travel.

Nonetheless, the smaller stores could help Wal-Mart do more than fend off Tesco. The retailer has been largely shut out from upper-income and urban markets, including those in California and New York. High land costs and local opposition have limited the discounter to just 28 supercenters in California, a tenth of the number in Texas. Smaller stores are less likely to stir up opponents than the hulking 200,000-square-foot big-box stores.

In health care, Wal-Mart sees itself providing an array of services and home-health equipment along with the prescription eyeglasses and pharmaceuticals that it already sells, according to a person familiar with the effort. “In five years, Wal-Mart wants to be on its way to becoming the No. 1 health-care company in America,” that person said.

In April, the retailer announced that over the next three years it would open up to 400 in-store clinics, offering basic services, including school physicals and treatments for sinus infections and allergies. It also said it hoped to have 2,000 clinics in operation in five to seven years. Wal-Mart has already teamed with some big employers hoping to improve employee health by providing standards for electronic health records. If that effort succeeds, it would give the Wal-Mart clinics a boost.

The world’s largest retailer hopes to begin rolling out the new convenience and health-care stores early next year, and it’s looking at locations in California for the pilots. A Wal-Mart spokesman said the company “regularly tests new formats” but declined to describe the effort further.

California has been an embarrassing stumbling block for the Arkansas retail giant. “Wal-Mart doesn’t have a format that works in California,” says Burt P. Flickinger III, managing director of retail consultant Strategic Resource Group. He believes the convenience-store effort is based in the San Francisco area because it is home to the Trader Joe’s chain, retailer of prepared foods and groceries, and it has become the biggest market for Whole Foods Inc. “Wal-Mart really needs to take a strategic stand” in the state, he says.

Tesco’s impending arrival in the U.S. Southwest has accelerated Wal-Mart’s plans. The British retailer is expected to open 30 Fresh & Easy Neighborhood Market stores by February and invest $2 billion in the U.S. rollout over the next five years, according to a spokesman for Tesco’s U.S. operation, which is based in El Segundo, Calif. After the first stores are launched, the company has 70 more stores in its pipeline for early 2008.

“The impact on the competition depends on how fast Tesco rolls out. I think it’ll be fast,” says David McCarthy, a London-based deputy head of equity research for Citigroup. He estimates Tesco could have 500 U.S. stores and U.S. revenue of $5 billion by 2010.

The proposed Wal-Mart stores would fit with U.S. chief Eduardo Castro-Wright’s goal of localizing the retailer’s business. As part of its effort to appeal to a broader range of consumers, Wal-Mart has begun tailoring merchandise and food selections to regional and ethnic groups and tastes. It recently asked fruit vendors to package apples, now sold in plastic bags, in paper sacks similar to those at roadside orchards. And it is reaching out to major suppliers, including Johnson & Johnson and Procter & Gamble Co., for advice.

Wal-Mart could use an injection of new ideas. Its earnings are expected to rise just 3.5% this year, to $12.52 billion, compared with a 10.2% increase just two years ago. The company remains the world’s largest retailer, with sales this year projected to hit $370 billion. But its rivals — Costco Wholesale Inc., Target Corp. and J.C. Penney Co. — have been turning in better comparable-store sales for more than a year.

Food sales are a double-edged sword for Wal-Mart. They represent its fastest-growing business, with revenue rising 14% last quarter and comparable-store sales up about 5% this year. But slim profits mean the company’s overall margins weaken as food’s share of the business gains. Wal-Mart shares hit a new 52-week low yesterday before bouncing back to close at $43.50, up 22 cents on the day.

In addition, Wal-Mart hasn’t successfully incubated new-store concepts since the first supercenter was created in 1988. Its effort to build a conventional grocery business via Neighborhood Market stores has been a modest success at best. The 40,000-square-foot outlets were designed to fill the gap between supercenters. But the company has opened just 124 of them since 1998.

Efforts to start new retail outlets overseas in countries like Germany were stark failures. In contrast, Wal-Mart has had some success entering into joint ventures with local retailers, as it did with Mexico’s Cifra SA in 1991, buying majority control after it understood the market.

Wal-Mart isn’t the only company readying new store formats. Major grocery chains are testing ideas that combine convenience and grocery stores. The third-largest U.S. supermarket chain, Safeway Inc., recently opened Citrine New World Bistro, a restaurant that uses its private-label brands.

FamilyMart Co., the third-largest convenience store operator in Japan, has opened 12 Famima convenience stores in the Los Angeles area and plans 250 U.S. stores by 2009. “This is a big, big target,” says Hidenari Sato, Famima’s vice president of U.S. operations.

Analysts say Wal-Mart hasn’t been able to penetrate the markets where wealthier America resides. “In the Northeast Corridor, California and Chicago you have 33% of U.S. income and retail sales. Yet these areas account for 10% of [Wal-Mart] stores and less than 2% of their supercenters,” says Greg Melich, a retail analyst at Morgan Stanley.

© 2007 Dow Jones Company

Supreme Court: Government Can Suppress Speech of Citizens, Not Corporations

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By David Lazarus 
First Published by the San Francisco Chronicle, June 27, 2007

The Supreme Court loosened restrictions on campaign financing this week by ruling that corporations and unions are entitled to run a wider variety of political ads in the final weeks of federal elections.

This was good news for corporations and unions. And bad news for Shannon Tracey.

Tracey is local projects director of Democracy Unlimited of Humboldt County, a grassroots group dedicated to repealing the notion of corporate personhood — a legal distinction that grants constitutional rights to businesses and other organizations.

“It’s awful that the court is continuing to uphold the idea that companies have what should be rights for human beings,” Tracey said of Monday’s decision, in which the justices backed a lower-court ruling that a Wisconsin anti-abortion group should have been allowed to air ads during a 2004 Senate race.

The 5-4 Supreme Court vote was widely seen as opening a loophole in the 2002 McCain-Feingold campaign-finance law, which placed strict limits on donations to political campaigns. In effect, it broadens the types of ads that moneyed interests can run prior to an election.

Editor’s note: while the writer calls the limits “strict” the McCain-Feingold bill more than doubled the amounts that wealthy individuals may invest in candidates to $4600 per candidate, per federal election ($2300 each for primary and general elections).

For Tracey and other foes of corporate personhood, the ruling doesn’t change the mountain they’re trying to climb. It only makes it a little steeper.

“The challenge we face is the same,” said Jeff Milchen, founder of ReclaimDemocracy.org in Montana. “We’re still seeking an end to constitutional rights being given to corporations.”

The stakes, he said, couldn’t be higher.

“Our democracy is founded on the idea of human rights, that the legitimate source of political power comes from the people,” Milchen said. “Allowing companies to exercise political power comes at the expense of citizens. It’s a zero-sum game.”

I wrote a few years ago about the origins of corporate personhood. Perhaps this is a good time to review the basics. Not everyone may realize that the Constitution’s phrase “We the people” applies just as much to the likes of Starbucks, Google and AT&T as it does to you and me.

The founding fathers probably never envisioned that private companies would one day enjoy the legal status of people — just as they couldn’t have anticipated the availability of cafe lattes on every street corner, Internet searches and cell phones.

There’s no mention in the Constitution of corporations being people. It could be argued that private companies were the last thing that Colonial rebels wanted to protect when they rose up in the Boston Tea Party in 1773.

The colonists weren’t attacking the British government. They were making their displeasure known to Britain’s East India Co., which owned the tea that ended up floating in the harbor.

Until the 19th century, corporations were basically viewed as artificial creations — the property of owners. They could be taxed and regulated pretty much as state authorities saw fit.

Things changed after the Civil War. As the U.S. economy rapidly expanded, corporations increasingly sought ways to strengthen their political influence and protect their wealth.

Business leaders focused on the 14th Amendment, adopted in 1868. It declares that no state can “deprive any person of life, liberty, or property, without due process of law; nor deny any person within its jurisdiction the equal protection of the laws.”

Corporate lawyers of the day argued that corporations are in fact groups of people and, as such, should have the same rights as people themselves.

A number of cases were heard in various courts, including Santa Clara County vs. Southern Pacific Railroad Co., in which the railroad challenged the county’s claim of unpaid taxes by arguing that it was forced to pay an unfairly high amount and therefore had been deprived of equal protection under the 14th Amendment.

In other words, the railroad was defining itself legally as a person.

In 1886, the Supreme Court accepted this argument with virtually no discussion. Chief Justice Morrison Remick Waite declared that “The court does not wish to hear argument on the question whether the provision in the 14th Amendment … applies to these corporations. We are all of the opinion that it does.”

There it was. In a mere two sentences, the notion of corporate personhood was established.

This week’s court ruling only reinforces the concept. There was no question that companies and other economic interests enjoy a right to free speech as per the First Amendment. The only question was whether the McCain-Feingold law unfairly limited that right.

The matter of corporate personhood would appear to be settled. But opponents of the concept maintain that it was essentially a historical accident — no hearings, no discussion, a two-sentence decision — and that it’s not too late to even the playing field.

“The biggest stumbling block to democracy is corporate constitutional rights,” said Tracey at Democracy Unlimited. “The notion of corporations having the same constitutional rights as you and I is inherently unjust.”

By that, she means that both companies and individual people may enjoy a right to free speech, but a company, because of its relatively vast wealth, is capable of exercising that right with far greater force and influence.

Milchen at ReclaimDemocracy.org agreed. “Economic power is translating into political power,” he said.

Milchen also found it interesting that on the same day the Supreme Court issued its ruling about corporate free speech, it also ruled that an Alaska high school didn’t violate a student’s rights by punishing him for displaying a banner that read “Bong Hits 4 Jesus.”

“Think about it,” Milchen observed. “The court ruled that the government has the authority to suppress the free speech of genuine human beings but not that of corporations. It’s a rather striking contrast.”

© 2007 San Francisco Chronicle

Articles on Corporate Welfare and Corporate Tax Issues

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Corporate Tax Evasion and Tax Rate Issues

Apr 2007
 Big Tax Breaks for Big Boxes (Syracuse Post Register)
Feb 2007
 Wal-Mart: Always Low Taxes (Baltimore Sun)
Jan 2007
 Transnational Corporations Dodging Taxes Through “Transfer Pricing”
Sep 2006
 Stop Corporate Tax Evasion in Montana
Nov 2004
 The Gap Between Statutory and Real Corporate Tax Rates
Sep 2004
 Corporate Taxes Continue to Plummet
Apr 2004
 Corporate Tax Evasion via Offshore Subsidiaries: A Primer

 

Corporate Welfare / Subsidies

July 2005
 The Sugar Industry and Corporate Welfare
Apr 2004
 Corporate Tax Evasion via Offshore Subsidiaries
Dec 2003
 Wal-Mart, the Abuse of Eminent Domain and Corporate Welfare
Nov 2003
 Republican Energy Bill Gives Away Billions to Bush Investors
June 2003
 Nuclear Power is Corporate Welfare
Apr 2003
 Once Foes of Big Tobacco, States Have Been Hooked

 

Useful Books and Websites on These Issues

  • Perfectly Legal by David Cay Johnson, 2003. The Pulitzer Prize-winning New York Times reporter reveals how the U.S. tax system is rigged to allow corporations and the very rich to elude paying anywhere near their official tax rate.
  • Taxpayer.net – A group dedicated to cutting corporate pork.
  • Citizen Works – has compiled a great deal of useful information on this topic
  • Cato.org/pubs/handbook/hb105-9.html – Guidelines from the libertarian-oriented Cato Institute to help congress reverse corporate welfare.
  • NewRules.org/retail/veto.html – This page offers several useful resources on curbing corporate welfare.

We welcome your suggestions for especially informative articles, studies, etc., including those that disagree with our perspectives.

The Dangers of Doing Business with Wal-Mart

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Forbes’ analysis shows suppliers’ profit margins drop as percentage of business done with Wal-Mart rises

By Tom Van Riper
First published by Forbes.com, April 23, 2007

A bottom feeding investor might be intrigued by an electronic games maker called Handheld Entertainment, a San Francisco-based company that’s trading at about a third of its 52-week high of $7.78 a share. While the company lost $12 million last year, it competes in a business where one big hit can turn things around.

But there’s another complication. Handheld Entertainment got 94% of its $3.8 million in sales through Wal-Mart, a dependency that it puts it at the mercy of the retail behemoth’s decisions on shelf space and promotional efforts. And investors tend to frown on companies with too many eggs in one shopping basket–less diversification means more risk. Selling a big chunk of your wares through Wal-Mart’s enormous distribution system can be a boon if the company likes what you have, but it also has the market power to inflict a lot of damage by shifting your shelf space or dropping you altogether.A bottom feeding investor might be intrigued by an electronic games maker called Handheld Entertainment, a San Francisco-based company that’s trading at about a third of its 52-week high of $7.78 a share. While the company lost $12 million last year, it competes in a business where one big hit can turn things around.

“Wal-Mart can be your best customer and your most difficult one at once,” says Walter Todd, a money manager at Greenwood Capital Management. “There’s kind of a constant push and pull.”

Business leaders, politicians and academics have debated the “Wal-Mart effect” on the U.S. economy for several years now. Mostly, they’ve been locked into the usual topics of low prices versus low wages, environmental concerns and discrimination toward workers. It’s been enough to spur the Wal-Mart PR machine to work overtime trying to soften the company’s image.

But other big pistons in the economic machine–institutional stock traders–are now basing more decisions on a different type of Wal-Mart effect. That is, measuring risk in consumer staple companies like Procter & Gamble and PepsiCo, in part, on how dependent they are on Wal-Mart to generate sales. Just as minimal diversification makes any investment portfolio more risky, a maker of laundry detergent, cosmetics or soft drinks could be flirting with danger when a high percentage of sales are pushed through a single retailer.

“Investors like to have better visibility into a company’s sales and into supply chains,” says Kevin O’Brien, chief executive of Revere Data, a financial information provider that tracks the percentage of sales that hundreds of companies generate through Wal-Mart. Revere specializes in analyzing corporate influence through a company’s business relationships.

Just ask Newell Rubbermaid, the maker of cleaning products and other consumer staples that hit a slump in the late 1990s, about Wal-Mart’s market power. With the company’s goods not moving at a pace that satisfied Wal-Mart, it lost prime eye-level shelf space. Newell Rubbermaid shares dropped from $50 to $20 between 1999 and 2001 before steadying. They’re now back to $30, but haven’t been close to their highs of eight years ago.

To measure the “Wal-Mart effect” on profits across different industries, Forbes analyzed information compiled by Revere to compare the percentage of sales that various firms generated through Wal-Mart in fiscal 2006 to the gross margins those firms produced during the same period. The survey covered 333 companies in six industry sectors that sell heavily to discounters and other retailers–apparel & accessories, consumer games & electronics, household accessories, food & beverage, personal care and leisure goods.

On balance, 카지노사이트 순위 firms that derive less than 10% of its sales through Wal-Mart averaged 39.1% in gross margin, or the percentage of profit realized before items like fixed costs and interest expense are considered. For those falling between 10% and 20%, gross margin falls to 36.2%. Above 20%, and margin dips a little bit more, to 35.4%. The trend is most pronounced in the apparel & accessories category, where average gross margin drops from 48.7% for companies generating less than 10% of its sales through Wal-Mart, to 28.7% for those selling 20% or more. Food & beverage also shows a big disparity, where the same breakdown shows average gross margins dropping from 39% to 22%.

In all, only 25 of 333 companies managed to beat its sector gross margin average while generating at least 10% of their revenue through Wal-Mart. Only seven that sold over 20% there did it. And the numbers show that company size has little to do with Wal-Mart dependency, at least once you get past the top handful. The 10 companies that sell through Wal-Mart in the highest percentages, a list that includes apparel maker Jaclyn and personal care company CCA Industries, average a relatively paltry $107 million in market cap (CCA is the only top-10 member whose gross margin beats its sector average). But past the top 10, companies that generate at least 10% of their sales through Wal-Mart carry an average market cap of $5.9 billion, more than the $4.9 billion average of those firms that sell less than 10% there.

While Wal-Mart squeezes margins of suppliers of all sizes, it’s still true that smaller companies tend to feel a tighter pinch. For example, beverage company Cott Corporation, even with a market cap in excess of $1.2 billion, doesn’t have the brand strength of Coca-Cola or PepsiCo, whose products are in more demand at supermarkets, convenience stores and other outlets. So Cott turns to Wal-Mart for 38% of its sales, compared to less than 10% for the two beverage titans. The result? Cott’s gross margin of 12.4% last year was about a third the industry average, while Coke and Pepsi both registered over 50%.

But even blue chips aren’t exempt from investors’ scrutiny. A double-digit percentage of sales through Wal-Mart or any other single retailer always raises a red flag.

“I wouldn’t not own a company just for that reason, but if I could choose between two companies that were basically equivalent, I’d choose the one that sells less through Wal-Mart,” Todd says.

© 2007 Forbes.com