The Volokh Conspiracy - Big Box Takings:

Duncan Currie of the Weekly Standard has a useful article on the increasing use of eminent domain to acquire land for major "big box" chain stores, such as Costco and Wal Mart. He quotes a letter from Costco Senior Vice President Joel Benoliel defending the practice:

[I]n places like California, Redevelopment Districts with bonding authority and powers of condemnation have been the norm for many decades. Much of urban America has been built using this tool. We don't see any legal or moral wrong in this. The fact is, if we refrained from participating in these deals, our competitors for these sites like Target, Home Depot, K-Mart, Wal-Mart, BJ's, Sam's Club, and many others would take advantage of our reticence, and our shareholders would be the losers. In short, we are not violating laws or any rules of the free market economy. We would be doing exactly that if we refused to participate in these deals when they are offered, while other retailers continued to do so.

Benoliel is right to note that such takings are common practice in many parts of the country, and right also that unilateral restraint by Costco would achieve little, since the "deals" in question would probably just go to Costco's competitors. He is wrong, however, to imply that such takings are necessary to promote economic development, much less that they are necessary to "build" urban America. In reality, they very likely cause more economic harm than benefit, as I have argued in great detail here and here. In addition, they tend to victimize poor and lower-middle class interests for the benefit of politically powerful developers and corporations such as Costco and its rivals.

As a general rule, I'm a fan of big box stores, which give customers excellent value for money. But if they want more land, they should be required to purchase it from voluntary sellers, just like all other businesses should do. If the sellers don't want to sell at a price acceptable to the chain store, that's a strong sign that they value the land more than the store does, and that a forced transfer would therefore destroy more economic value than it creates.

The main objection to this reasoning is the assertion that large, beneficial development projects might be stymied by holdouts. I have rebutted that claim in some detail in this article (pp. 204-10), and see also this excellent Cornell Law Review article by Daniel Kelly. In any event, holdout problems are unlikely to be a significant issue for big box stores because few are large enough to require purchasing property from a large number of owners in order to assemble the needed land.

In most cases, big box takings represent are redistribution from politically weak property owners to the store's stockholders and employees. There is little if any gain to the community as a whole, and often an actual loss resulting from the loss of more valuable land uses.

	[Ilya Somin, July 26, 2007 at 4:27pm] Trackbacks Big Box Takings: Duncan Currie of the Weekly Standard has a useful article on the increasing use of eminent domain to acquire land for major "big box" chain stores, such as Costco and Wal Mart. He quotes a letter from Costco Senior Vice President Joel Benoliel defending the practice: [I]n places like California, Redevelopment Districts with bonding authority and powers of condemnation have been the norm for many decades. Much of urban America has been built using this tool. We don't see any legal or moral wrong in this. The fact is, if we refrained from participating in these deals, our competitors for these sites like Target, Home Depot, K-Mart, Wal-Mart, BJ's, Sam's Club, and many others would take advantage of our reticence, and our shareholders would be the losers. In short, we are not violating laws or any rules of the free market economy. We would be doing exactly that if we refused to participate in these deals when they are offered, while other retailers continued to do so. Benoliel is right to note that such takings are common practice in many parts of the country, and right also that unilateral restraint by Costco would achieve little, since the "deals" in question would probably just go to Costco's competitors. He is wrong, however, to imply that such takings are necessary to promote economic development, much less that they are necessary to "build" urban America. In reality, they very likely cause more economic harm than benefit, as I have argued in great detail here and here. In addition, they tend to victimize poor and lower-middle class interests for the benefit of politically powerful developers and corporations such as Costco and its rivals. As a general rule, I'm a fan of big box stores, which give customers excellent value for money. But if they want more land, they should be required to purchase it from voluntary sellers, just like all other businesses should do. If the sellers don't want to sell at a price acceptable to the chain store, that's a strong sign that they value the land more than the store does, and that a forced transfer would therefore destroy more economic value than it creates. The main objection to this reasoning is the assertion that large, beneficial development projects might be stymied by holdouts. I have rebutted that claim in some detail in this article (pp. 204-10), and see also this excellent Cornell Law Review article by Daniel Kelly. In any event, holdout problems are unlikely to be a significant issue for big box stores because few are large enough to require purchasing property from a large number of owners in order to assemble the needed land. In most cases, big box takings represent are redistribution from politically weak property owners to the store's stockholders and employees. There is little if any gain to the community as a whole, and often an actual loss resulting from the loss of more valuable land uses.