Policymaking at the Courthouse

In recent years, the convenience store industry has increasingly seen its fate play out beyond the walls of Congress and the federal agencies. From state capitols to city halls, every level of government is inserting itself into policy debates that affect the bottom lines of c-store owners and operators. With more extreme politics and shorter time horizons at the state and local level, predicting the outcome and impact of these efforts is more difficult than the grinding federal policy process.

To add another component to the morass of legislative and regulatory threats to the industry, many of today’s major battles are being fought in the courtroom. Several recent examples illustrate the high stakes and often-unpredictable nature of taking the litigation route.

The c-store industry continues to lead the fight in the ongoing legal wrangling surrounding swipe fees and the proposed settlement agreement reached last year. Most major retailers and their trade associations soundly rejected the deal proposed by the big banks and credit card companies, as they rightly should have given the restrictions placed on future litigation regarding yet-to-be developed technology. Helpfully, NACS has created an online mechanism -- http://merchantsobject.com -- to educate smaller retailers and provide a quick method for opting out of the proposed settlement before the May 28 deadline.

The deal did offer what many retailers would consider a tempting consolation prize – the ability to implement a surcharge on credit card transactions in order to recoup some of the fees paid to the banks and credit card companies. But in an ironic and suspect twist, more than half of the state legislatures in the country are presently considering bills to ban surcharging as allowed by the proposed deal.

In this case, not only are retailers being force-fed a deal they generally oppose, but they are also being portrayed in the surrounding political theatre as heartless corporate behemoths only interested is “swiping” another nickel from consumers. With federal government bailouts of the banking sector still fresh in our minds, the aggressive hypocrisy of this situation is difficult to overstate.

Another policy matter being played out in the courts that should be on the radar of c-stores is New York City’s effort to restrict the sale of large sugary drinks at many venues. C-stores were not included in the scope of the new rule, and that is partially why Judge Melvin Tingling on March 11 – the day before it was to go into effect – struck it down. Tingling declared that such policy was the jurisdiction of the City Council, not the Board of Health and – importantly for c-stores – “fraught with arbitrary and capricious consequences" leading to "uneven enforcement even within a particular city block, much less the city as a whole."

While the city has already appealed the ruling, the events in New York show that even when an industry sits on the sidelines safely out of the glare of new government regulations, unpredictable legal proceedings have a way of expanding the playing field. The ban will not go into effect while the courts hear the mayor’s appeal, but that may not stop city councilors who support the ban from introducing a version that includes all venues where large sugary drinks are sold. That means you, convenience stores.

Ultimately a company or industry engaged in the policy process must decide how to balance the threats and opportunities from the legislative, regulatory and legal fronts. Costco is a retailer that has historically eschewed government relations and instead chosen to spend massively on a litigation strategy to, for instance, expand its ability to sell and ship wine to more customers. Costco’s investment in changing policy through court fights has likely done more to improve its bottom line than the lobbying strategies of many companies.

Without anointing either strategy as perfect, companies clearly must drive an internal conversation about the allocation of the limited resources of time and money as they engage in the policymaking process. No longer is it a choice between a federal vs. state and local lobbying strategy. The courtroom is now an unavoidable sandbox where much of the future of c-stores will be decided.

Joe Kefauver is managing partner of Parquet Public Affairs, a national issue management, communications, government relations and reputation assurance firm that specializes in service-sector industries. Parquet's clients include Fortune 500 corporations, trade associations, regional businesses and non-profit organizations. For more information, go to www.ParquetPA.com.

Editor’s note: The opinions expressed in this column are the author's and do not necessarily reflect the views of Convenience Store News.