Bass Pro Blocked From Reeling in More Power
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Last week, there was some under-the-radar good news for local communities and consumers: The Great Outdoors Group and Sportsman’s Warehouse called off a proposed merger, after scrutiny from the Federal Trade Commission and attorneys general in several states, including Tennessee, Pennsylvania, Alaska, Colorado, Iowa, and California. Great Outdoors Group will pay Sportmans Warehouse a $55 million termination fee and both parties will then walk away.
Why is this good news? The Great Outdoors Group is the entity that resulted from a merger of Bass Pro Shops and Cabelas, and has a sordid history of sucking money out of local communities and failing to keep its promises regarding jobs and investment. Allowing it to become larger and more powerful would have made that dynamic even worse.
The long version of the background to this story is here, but the shorter version is that Bass Pro Shops and Cabelas sell themselves as destination retail outlets that people will drive from all over to visit, and argue that therefore they should be subsidized by taxpayers, often as so-called “anchor stores” for larger retail areas. Bass Pro is the third-most subsidized retailer in the country — having received more than $395 million — trailing only Amazon and Sears, and ahead of retail behemoths like Walmart, Lowe’s, and Target.
The Bass Pro/Cabelas case, though, is nonsense, as you can see from this map of their locations. They are everywhere, not some special destination that hordes of travelers will descend upon.
That’s why so many communities have been burned by these stores, such as Independence, Missouri, Harrisburg, Pennsylvania, Mesa, Arizona, and Memphis, Tennessee. They invested tons of money only to see the results underwhelm.
When antitrust enforcers allowed Bass Pro to merge with Cabelas to form the Great Outdoors Group, things got worse, as locations that might compete with each other were closed and Cabela’s headquarters in Nebraska was devastated by layoffs. The merger was also bad for small businesses, as small outdoor goods stores tend to be run out of the market when Cabela’s or Bass Pro show up.
Allowing the Great Outdoors Group to add 122 Sportsman’s Warehouse locations would have been even more detrimental to communities, for three reasons. First, there’s good evidence Bass Pro and Cabelas competed intensely on price before their merger; the same is likely true of Sportman’s Warehouse, so adding all of them together would have given the new entity more power to raise prices and more incentive to cut jobs in the name of efficiency.
As Colorado Attorney General Phil Weiser said, “The merger, which would have combined two of the largest U.S. operators of outdoor specialty stores, threatened to harm consumers and workers in the Denver, Colorado Springs, and Grand Junction areas through higher prices, fewer outdoor gear options, the likely closure of some stores, and a loss of jobs.”
Second, fewer retail options means also more power for those that remain, and increases their ability to extract resources for communities vying for anything that looks like new economic activity. Great Outdoors Group preys on desperation for major retail, and that would have been an easier sales pitch with more brands under its umbrella. (As I reminder, I have a list of things lawmakers can do to help bolster local retail here.)
Finally, as far as I can tell, Sportsman’s Warehouse has not made a habit of collecting tax incentives. But subsidies are such a core part of the Great Outdoors Group business model — Cabela’s literally listed economic development subsidies in its financial filings as key to its profits when it went public — that I imagine Sportsman’s would have started chasing them post-merger.
So all in all, I think shoppers, workers, and local economies will all come out ahead with Sportsman’s Warehouse staying an independent entity, rather than merged into the Great Outdoors Group behemoth.
This episode is a good reminder that there’s power to help local communities residing in lesser-known places. The merger was essentially blocked by the FTC and state AGs. Though I don’t think it was formally announced, Weiser in a statement alluded to a lawsuit from the states and the FTC to stop the merger, so things were quite serious. The two corporations clearly read the writing on the wall and pulled the plug rather than go through a lot of effort that would have led them nowhere.
That’s a federal agency few people ever think about and officials in a political office that gets scant attention compared to most others doing a whole lot of good for communities just by threatening to use the laws at their disposal. The only comparable recent action I can think of is the FTC, along with Pennsylvania and the District of Columbia, blocking a merger in 2015 between Office Depot and Staples, for similar reasons that critics objected to the Great Outdoors Group-Sportsman’s merger: Two major players in a single retail sector joining forces would have been bad news for everyone.
Are you seeing news about proposed mergers in your community? Flag them for your state AG (and send them to me, too, please). You might benefit a lot of people.
ONE MORE THING: I like to think that someday New Jersey will stop throwing tax breaks at casinos in a hopeless effort to make Atlantic City a premier gambling destination again, but that day, alas, is not today.
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— Pat Garofalo