City Journal

Carolyn Lochhead
Fun and Games at the Consumer Affairs Department
Do Mark Green's publicity stunts actually hurt New York's consumers?
Summer 1992

Carolyn Lochhead is Washington correspondent for the San Francisco Chronicle.

The Department of Consumer Affairs press release carried Commissioner Mark Green’s name in eponymous green ink. It announced that, in a major citywide sweep, a dozen undercover agents had penetrated 254 New York salad bars and delis, finding that one in three was cheating its customers. The Daily News immediately picked up the charge: that customers are routinely bilked by shopkeepers who make them pay for the weight of the plastic trays that hold their chicken, pasta, Greek salads, and other delicacies. “Salad bars are apparently full of more than one type of baloney,” Green quipped. The commissioner charged 115 stores with deceptive trade practices.

Operation Salad Storm, as one might call it, is typical of the flamboyant style Green has brought to his office. Mark Green clearly likes attention. He has become one of the city’s most visible public officials, using press releases, photo-ops, and TV appearances as the chief weapons in his war against “consumer abuse” and “business predators.” The 47-year-old Green projects himself as a champion of consumers, he says, especially poor consumers, who, “lack the sophistication to know when they are being defrauded by the marketplace.”

The department, created in 1968, enjoys broad regulatory powers. An agency pamphlet boasts that New York’s consumer regulations “constitute the most effective, comprehensive set of remedies against abuses in the marketplace available to any jurisdiction in the country.” The department enforces all laws “relating to the sale and offering for sale of goods and services within New York City.” Many of these cover false advertising and other deceptive trade practices. The agency also licenses fifty thousand businesses, including billiard rooms, caterers, parking lots, horse-drawn cabs, bingo games, laundromats, debt collection agencies, movie theaters, and scrap metal processors.

Thanks largely to Green’s efforts, the Department of Consumer Affairs is the most visible of the many city and state agencies that regulate the relationships between business enterprises and their customers. New York State has so many such agencies that it has established the New York State Consumer Protection Board to coordinate them. Yet, how many New Yorkers can name the head of the city’s Department of Housing Preservation and Development, which keeps an eye on the physical conditions of rental housing, or the state’s Division of Housing and Community Renewal, which enforces rent regulations in the city? Officials of the city’s Taxi and Limousine Commission and Department of Health likewise toil in obscurity.

But Mark Green is different. A media-savvy two-time congressional candidate and former guest host on CNN’s Crossfire, he is a master of the dramatic backdrop and the clever sound-bite. Green employs these tools, he says, in defense of consumers victimized by the vagaries of the market. “Laissez” he says, in characteristic Greenspeak, is not always fair.”

Some of what Green has done is worthwhile. He closed down a midtown electronics store that had a long history of bilking tourists. He launched “Tuesday Nite Out,” a promotion by restaurants, parking lots, theaters, and other retailers offering discounts on a routinely slow night to bring more people into the city and help reduce crime. Yet the great bulk of his efforts have been at best silly, and at worst destructive to the city’s economy and the interests of consumers.

The salad sting is a case in point, carrying several classic Green trademarks. It targeted an intensely competitive business, one that caters to the type of person who can afford lettuce at $4 a pound. City inspectors went into stores posing as customers. Fines were collected. The story was released to the media via a colorful press release filled with catchy phrases.

Yet Green’s anxieties about container weight add up to a distinction without a difference. Containers obviously weigh—and cost—something. Proprietors can either charge separately for the container, or pass the cost along to the consumer in higher salad prices. Either way, it has no effect whatsoever on the total cost to the consumer. Department stores, similarly, “give away” fancy shopping bags, but consumers pay for the bags when they buy the goods that go into them.

Indeed, if the sweep accomplished anything, it probably raised prices in New York’s salad bars. Green’s press release stated that the offending stores had paid $13,500 in fines to the city. The Consumer Affairs Department notes with pride that under Green’s leadership, it has become “self-sufficient,” raising, from license fees, fines, and court judgments, 101 percent of the $13 million it spent in 1990. The press release does not, of course, mention that these costs are ultimately passed on to consumers, particularly in a case like the salad-bar sweep. Competition among New York delis and salad bars narrows profit margins so tightly that proprietors cannot afford to absorb any additional costs.

If such subtleties are lost on Green, it may be because his background is in law and politics, not economics. A Brooklyn native and graduate of Cornell University and Harvard Law School, Green spent the Seventies working with Ralph Nader, a man he recently described as “a friend, a mentor, and a hero.” In 1980, voters rejected Green’s bid for the Upper East Side congressional seat held by Republican Bill Green. In 1986 he unsuccessfully challenged Alfonse D’Amato for the U.S. Senate. From 1981 until he took his current post, Green headed a think tank called the Democracy Project, which political insiders say consisted primarily of Green and served mainly to provide him with a title to use when writing articles and making television appearances.

Green has written or edited 14 books, including Reagan’s Reign of Error and America’s Transition: Blueprints for the 1990s, a policy guidebook for what he hoped would be a Dukakis White House. He has also written frequently for The Nation, Mother Jones, and the op-ed page of the New York Times.

In 1990, Mayor David Dinkins appointed him commissioner of consumer affairs. At long last, Green could implement the ideas he learned from his mentor; he had become, in his own description, “a Naderite with subpoena power.” At his swearing-in, he announced that he would be “watching and suing whenever necessary.” Among his first actions as commissioner was the formation of the “Green Team,” a volunteer group composed of lawyers (along with students and senior citizens) to help sue businesses.

Some observers say Green accepted the appointment largely as a launching pad for another political campaign. Many expected him to run against D’Amato again in this year’s Senate race, but his prospects dimmed considerably when Attorney General Robert Abrams announced his candidacy. Green now says he will serve out his first term in the Dinkins administration. TemptIng as it might be to run again, he explains, his current post gives him “an incredible opportunity to implement the ideas I’ve been writing about.”

Oddly enough, Green insists that among his ideas is a deep appreciation of how market competition in a free economy leads to greater choice and lower prices for consumers. “I’m a very passionate believer in the competitive market economy,” he says in an interview. He speaks of the “brilliance, efficiency, innovativeness” of markets. But he quickly adds that he believes he is a necessary part of the free-market system. The government must intervene, he says, when the market fails.

In particular, Green believes poor people are not sophisticated enough to spend their money wisely in the face of powerful advertising and merchandising strategies. This consumerist mindset, best articulated by John Kenneth Galbraith in his 1958 book The Affluent Society, views customers as passive instruments whose spending choices are dictated by manipulative marketing techniques. This view, never persuasive to Galbraith’s fellow economists, is also at odds with common sense. Consumers—especially poor working people on tight budgets—tend to be shrewd judges of their own interests. Businesses, meanwhile, cannot survive unless they give consumers what they want. These assumptions are at the heart of market economics.

Green’s actions belie his professed devotion to the free market. In a recent report titled The Poor Pay More, he accused New York City supermarkets of discriminating against poor people—and ignoring lucrative business opportunities—by shunning low-income areas. To prepare the report, Green’s staff consumed “hundreds of person-hours,” many of which were spent interviewing supermarket executives and community activists. The report concluded that such discrimination forces the poor to rely on bodegas and other “dirty, cramped food stores that charge more than stores in middle class areas.” The report captured wide media notice, including a favorable story in the Wall Street Journal.

“Supermarkets, contrary to their own interest, and the interest of the community,” Green asserts, have “abandoned the inner city.” Supermarket owners, he alleges, are “following stereotypes rather than economics.” Green claims supermarket chains would be making money in the inner city if not for their owners’ “lack of interest in serving minority people and neighborhoods.”

The argument implies that supermarkets are intentionally ignoring unexploited profit opportunities that the Department of Consumer Affairs has uncovered. In effect, Green is claiming to be a better judge of a supermarket’s financial interests than its owner. “Capitalism is brilliant, but not omniscient,” he says. Government must step in to correct market imperfections.” Green’s analysis, according to a Wall Street economist, “displays such a fundamental ignorance of the premises of a market economy that it’s breathtaking.” This is not to say that business owners, managers, and investors do not make mistakes. But the market ensures that when they err consistently, competitive forces will put them out of business. Indeed, many stores have tried to operate in poor neighborhoods, but found it unprofitable and pulled out.

Bodegas also came under fire in Green’s report for exploiting a “captive clientele” and stocking too little nutritious food and too much “beer, finger cakes and potato chips.” The report also faulted a “lack of courtesy cards and teller machines.”

Similar allegations dating back to the 1960s were long ago refuted by economist Walter Williams, who studied retail pricing in poor, particularly black, neighborhoods. Prices are indeed higher in poor areas, Williams found, but so are costs. Insurance premiums for fire, theft, and vandalism cost more. Extension of credit, an essential and common practice among New York bodega owners, adds further risks. And bodegas are not able to do the same volume of business as supermarkets. Thus, even with higher prices, stores in poor neighborhoods are considerably less profitable than their middle-class counterparts. So-called merchant greed is, in fact, merely a response to a high-cost environment.

Green’s report made much of the fact that some grocery chains aim at a more affluent customer than others. But every store targets a particular customer base: Does Saks Fifth Avenue “discriminate” by neglecting K-Mart shoppers? The report also bemoans a lack of “communication” between retailers and their customers, and suggests that the city help activists set up “forums” where consumers can air grievances about grocery stores. Yet such actions would most likely serve not to encourage merchants to open additional stores, but rather to frighten still more away.

What is most striking, however, is the way Green played up allegations of discrimination—in a press conference, a New York Times op-ed piece, and an interview with the City Journal—while ignoring the report’s most noteworthy finding: that the city government has erected daunting obstacles to building supermarkets in poor neighborhoods.

The report cites “the extraordinary length, complexity, and expense of the city’s environmental review procedures” and its onerous zoning restrictions. It points out that the city often requires a developer to gauge the likely economic impact of a new supermarket on existing stores, a requirement the city has used to prevent competition from supermarkets. Developers must pay for these complex and highly politicized permit procedures, which can cost hundreds of thousands of dollars and take years to complete. City Planning Department officials told the agency that the land-use review process for the new Waldbaum’s store in College Point, Queens, took three years. “These delays can torpedo a store development,” the report notes.

Moreover, supermarkets must obtain a special permit from the planning commission in order to locate on land zoned for manufacturing. (This requirement also applies to variety, department, and furniture stores of at least ten thousand square feet.) The report points out that, since most of the best remaining supermarket sites are in manufacturing zones, “this requirement has seriously discouraged new supermarket development.” It says that the Pathmark that opened in 1982 in the Gowanus section of Brooklyn “was delayed many months by special permit reviews, during which a dispute developed with area residents concerned about increased traffic.” City planning officials told the agency that shopping centers now being built in Brooklyn and Queens are “circumventing the special-permit rule by using a hardware store (Pergament) and a toy store (Toys ’R’ Us), rather than a supermarket, as anchors.” Although the developers would like to include a supermarket, they told the Consumer Affairs Commission that they “don’t want to contend with the special permit review process.”

The report says that Al Schneider, president of Royal Farms, a 16-store supermarket chain, complained about the land-use review process in his attempts to open new supermarkets on Webster Avenue in the Bronx and Coney Island in Brooklyn. Both need zoning variances. The report says:

About the Bronx project, which has already spent 15 months in the ULURP pipeline, Schneider said, “We were promised (by the city) just three months ago that it was now only a matter of getting something typed, that someone was out on vacation and it would be done when they returned. But then the City suddenly decided they needed a traffic study, which we did. Now they’ve come up with something else—that we need a noise study. It never ends. After I do this latest thing they might want something else.” He said the various delays could lead to his dropping the Brooklyn project.

These findings strongly suggest that the dearth of supermarkets in poor neighborhoods is largely the result of government failure, not market failure. But when he talked to the press, Green chose to play up his questionable allegations of merchant discrimination and exploitation, squandering a remarkable opportunity to call attention to city regulations that palpably harm New York’s consumers.

Green’s interest in the supermarket business is not limited to poor neighborhoods. In July 1990 he held a press conference in front of a D’Agostino supermarket on First Avenue and 86th Street in Manhattan to announce his contention that a proposed merger between the D’Agostino and Sloan’s chains was anticompetitive. The supermarket industry happens to be among the most competitive in America, its profit margins held to around 1 percent of sales. Green says he asked the Federal Trade Commission to examine the merger (which clearly lay outside his own jurisdiction) because it would increase a company’s market concentration “in the relevant market.” That market, he explained, includes the Upper East Side, “an area where I live.”

Green effectively killed the deal on his own. Nicholas D’Agostino, chairman of D’Agostino Supermarkets, says the Sloan family backed out at the prospect of becoming embroiled in a lengthy federal investigation. D’Agostino believes Green was motivated by his political ambitions: “It was during one of his periods of, ’I may want to run for senator again someday,’ and he wanted to keep his name in the papers.” (Sloan’s executives did not respond to requests for comment.)

Green defends his intervention. “My job was to make sure that consumers had the best result of a competitive market economy,” he says. The effect, however, was precisely the opposite. A merger between two smaller chains would yield a stronger entity better able to compete against larger retailers, including the market leader, A&P. Quashing the merger harmed consumers by weakening competition.

“I wake up in the morning,” Green insists, “thinking I have one and only one mission: to fight like hell to make sure consumers have the choice of low price and high quality and are free from consumer fraud.” But the way Green approaches his job suggests he is moved more by hostility toward business than friendliness toward the consumer. This hostility is evident in the way he handles his studies, as well as their content. For example, supermarket executives first heard about Green’s allegations of discrimination when reporters started calling for comment. Green says he feels free to release studies without giving “advance copies to the people we’re criticizing. They understandably would like to schmooze and co-opt us, or to put it in a better light, to give us information.” But what if such information proved relevant, or if discussions with an industry moved it to take corrective action? Surely the consumer would be better served—but it might diminish the drama of a press conference.

The most serious problem with Green, though, is not his thirst for publicity or his presumed political ambitions. It is, rather, the uses to which he puts his energy and skills. As the grocery store issue illustrates, New York’s consumers would be better served if their Consumer Affairs Commissioner were just as aggressive in criticizing anticonsumer regulation as he is when his target is a private business. Yet Green refuses to comment on how consumers are affected by city regulation of such industries as taxicabs and cable TV, because they “are currently regulated by another agency in this government, not me.” It is worth asking, moreover, why the city seems so uninterested in assuring that New Yorkers get a fair deal when they consume goods and services, including education, provided by the monopolistic city itself.

Green has become part of New York’s prevailing governmental culture, which is generally hostile to business and harmful, in effect if not intent, to consumers. Small business owners, especially, see city regulators as combative and confrontational. Mark Alesse, New York director of the National Federation of Independent Business, says many want to leave but cannot. “They’ve built a client base that is local, and they’re stuck,” he says. “But the sentiment is, ’Boy, I’d get out in a flash if I could.’ And many of those who can are looking into ways to do so.”

Green’s true motives are symbolized by his favorite backdrop for publicity photos—a storefront with a padlock on the door. Such photographs, repeated in different settings throughout the city, portray with vivid clarity not, as Green would have it, the triumph of New York consumers, but the departure of many businesses that sought to serve them. As New York businesses close, the marketplace becomes less competitive, and consumers are left with fewer choices and higher prices. If Green were truly a champion of the consumer, he would devote himself to preventing this from happening.

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