From “Mom and Pop” to Wal-Mart: The Impact of the Consumer Goods Pricing Act of 1975 on the Retail Sector in the United States

A leisurely drive through the suburban shopping districts of virtually any American city reveals the successful inroads that large mass merchandisers have made into the retail sector in the United States. At the same time, the once-thriving downtown shopping areas of many of these same cities are now rife with boarded-up retail storefronts. Unfortunately, the rise of the corporate retail superstores has come at least in part at the expense of traditional, local, mom-and-pop dealers. While shoppers seem to uniformly appreciate the often lower retail prices available at the mass merchandisers, many also rue the loss of personalized customer service previously provided by friendly, local dealers. In this paper, I examine in detail these retail changes in the United States. Using time series data covering the last 40 years, I first paint an empirical picture of the retail sector, providing numerical evidence of the migration from smaller dealers to fewer, larger retail establishments. With this movement toward mass merchandising, there has indeed been a reduction in the level of point-of-sale information services offered to customers on the retail shop floor. Put simply, the empirical evidence is consistent with the casual, anecdotal story told above. But what lies behind this transformation of the retail sector in the United States? I posit that an important piece of federal legislation, the Consumer Goods Pricing Act of 1975,1 which effectively outlawed the manufacturer practice of resale price maintenance (RPM), played a key role in the demise of small, service-oriented retail