Dollar General: Corporate Rap Sheet
by Philip Mattera
Dollar General is one of the biggest players in the dollar store sector of U.S. retailing, which targets consumers with incomes so low they can't afford to shop at discounters such as Wal-Mart. It operates more than 11,000 "small-box" outlets, mostly in small towns and rural areas, and has annual revenue of more than $17 billion.
Dollar General has sought to capture a greater share of the spending of low-income families on consumables by introducing more food products, including some fresh and frozen items, but that spending has been hampered by cuts in the food stamp benefits on which many of those families depend.
Along with the other dollar-store chains, Dollar General has been involved in controversies of over the sale of hazardous products (including Chinese-made toys containing lead) and the denial of overtime pay to store managers who perform a great deal of non-administrative work. The company, whose workforce of about 100,000 is entirely non-union, has been targeted in some of the wage protests by retail worker groups.
Dollar General's position as the undisputed leader of the deep-discount sector came to an end in 2015 when Dollar Tree won a takeover battle for Family Dollar.
Dollar General dates back to 1956, when the J.L. Turner & Son dry goods wholesale business in Kentucky opened a retail outlet to dispose of a large quantity of lingerie. Turner added other merchandise but kept prices of all items under $1. The concept was well-received, and during the 1960s the Dollar General chain spread rapidly throughout the southeastern United States.
After taking over the company from his father in 1968, Cal Turner accelerated the growth through the acquisition of other chains such as P.N. Hirsch and Eagle Family Discount. That approach ended up stretching the chain too thin, and in the late 1980s Turner decided to focus exclusively on internal expansion, especially in small towns overlooked by giant discounters such as Wal-Mart. He added some items above $1, while keeping most below $5, and he relied on limited direct mail and word-of-mouth rather than advertising.
In 2001 the Securities and Exchange Commission launched an investigation into Dollar General accounting irregularities that inflated reported earnings. Dollar General had to restate its financial results for three years, and Cal Turner had to step down. The company also paid $162 million to settle a shareholder lawsuit and later paid a $10 million civil penalty to the SEC. Turner and three other former executives also paid individual fines totaling about $2.6 million (see here and here).
Despite the scandal, Dollar General, along with other dollar stores, benefited from the expanding demand for low-cost goods, even among middle-income consumers. The company introduced Dollar General Market stores, larger outlets with more food, including fresh produce and refrigerated and frozen items. Including these offerings allowed the chain to begin accepting food stamps.
In 2007 the private equity firm Kohlberg, Kravis & Roberts took over Dollar General for about $7.3 billion, including the assumption of about $380 million in debt. Among KKR's plans was a stronger push into urban markets, where Dollar General had lagged behind its competitor Family Dollar.
In 2009 KKR arranged for Dollar General to go public once again, offering about 12 percent of the company to investors. In 2013 KKR and its private equity partner Goldman Sachs sold their holdings in Dollar General.
In 2014, after rival deep discounters Dollar Tree and Family Dollar announced a merger plan, Dollar General launched a hostile takeover bid for Family Dollar. But the other companies, arguing that antitrust regulators would never approve Dollar General's deal, went ahead with their plan and Dollar General eventually backed down.
Recalls and Product Safety
Dollar General has been involved in numerous recalls of hazardous products sold in its stores. Here are examples from the past ten years.
July 2011: Pilgrim's Pride recalled 18,000 pounds of chicken nuggets believed to be contaminated with Listeria that were shipped to Dollar General stores in nine states.
February 2011: Atico International USA and the Consumer Products Safety Commission recalled about 92,000 radiant heaters sold exclusively at Dollar General stores because of a fire hazard.
February 2010: Dollar General and the CPSC recalled about 9,600 Chinese-made toy gun sets because of a piece that could be removed and pose a choking hazard for small children.
July 2009: Dollar General was fined $100,000 by the CPSC for selling children's products containing lead paint.
October 2008: Dollar General and the CPSC recalled about 200,000 Chinese-made battery-operated toy speed boats because of overheating and burn hazards.
September 2008: Dollar General and the CPSC recalled about 223,000 retractable dog leashes because the metal clasp connecting the leash to a dog's collar could bend or break while in use, posing a serious risk of injury.
February 2008: Dollar General terminated sales of a Pokemon Valentine's day product which combined lollipops and cards after a metal object was found in one of the lollipops.
November 2007: Dollar General and the CPSC recalled about 51,000 Chinese-made children's sunglasses because they contained excessive levels of lead paint.
November 2007: Dollar General and the CPSC recalled about 380,000 Chinese-made pull-and-release toy cars because they contained excessive levels of lead paint.
October 2007: Dollar General and the CPSC recalled about 63,000 Frankenstein-style children's tumblers because they contained excessive levels of lead paint.
April 2007: Dollar General and the CPSC recalled about 396,000 children's key rings because they contained excessive levels of lead paint. The recall was later expanded.
September 2005: Dollar General and the CPSC recalled about 455,000 units of costume jewelry because they contained excessive levels of lead.
May 2005: Dollar General and the CPSC recalled about 80,000 heart-shaped pendants because they contained excessive levels of lead.
February 2005: Dollar General and the CPSC recalled about 180,000 weighted dive sticks because of the risk that children could fall or land on upright dive sticks in shallow water and suffer impalement injuries.
In 2007 the U.S. Environmental Protection Agency proposed a penalty of $800,000 against the company for selling a product called Krazy String containing an ozone-depleting substance banned by the Clean Air Act. The company challenged the penalty and negotiated a reduction to $155,823.
In February 2015 a coalition called the Campaign for Healthier Solutions began pressing Dollar General and other dollar store chains to adopt comprehensive chemical management plans to identify, disclose and remove hazardous substances from their supply chains and from all products in their stores. The campaign published the results of research in which 81 percent of a group of 164 products sold in dollar stores were found to contain dangerous chemicals such as phthalates, polyvinyl chloride plastic, and toxic metals such as lead.
Occupational Safety and Health Issues
Among the most serious occupational safety cases brought against Dollar General in recent years are the following: In November 2014 OSHA proposed $51,700 in penalties in connection with four repeat violations at a store in Brooklyn, Mississippi. The violations involved the company's failure to ensure that that exit routes, fire extinguishers and electrical access panels were not blocked by merchandise, display racks or supplies. In January 2015 OSHA proposed $55,000 in fines for similar violations at a store in Wolcott, New York.
In 2002 a proposed class action lawsuit was filed in federal court in Alabama alleging that the company improperly designated store managers as exempt employees to make them ineligible for overtime compensation. The court denied the plaintiffs' motion to have the case proceed as a nationwide class action but allowed it to continue as a collective case. In 2006 the company settled the matter for amount that it did not disclose. Additional manager overtime cases followed in various states. Dollar General managed to prevent class certification in some instances, though it settled one case for $8.5 million.
Employment Discrimination Issues
In 2006 a complaint was filed in federal court in Alabama alleging that Dollar General discriminated against female store managers in its compensation practices. After the court approved a nationwide class certification, the company moved to settle the case for $18.75 million.
In 2011 the U.S. Equal Employment Opportunity Commission announced that Dollar General subsidiary Dolgencorp would pay $50,000 to settle sexual harassment charges brought on behalf of three workers in North Carolina.
In 2013 the EEOC announced that Dolgencorp would pay $47,500 to settle disability discrimination charges involving an employee in Indiana.
In 2013 the U.S. Equal Employment Opportunity Commission filed suit against Dollar General for using criminal background checks to screen out job applicants and to fire existing employees. The matter has not yet been resolved. The company also faced a private lawsuit over the issue, which it settled in February 2014 for $4 million.
In 2014 the EEOC announced that Dolgencorp would pay $27,500 to settle sexual harassment charges involving a store manager in Arkansas. Later that year, the EEOC sued Dolgencorp in connection with a female employee in Georgia who was allegedly subjected to sexual harassment on the job and then was fired when she complained.
Economic development subsidies
According to the Good Jobs First Subsidy Tracker, Dollar General and its subsidiaries have received a total of 50 state and local subsidy awards with a total value of $13.2 million. The largest awards, for distribution centers, have been a $6.7 million Hoosier Business Investment Tax Credit and a $3 million EDGE tax credit, both from Indiana in 2009; a $1 million Pennsylvania First grant in 2012 (the facility also received $1 million in Job Creation Tax Credits and $225,000 in job training assistance); and a $962,500 Qualified Target Industry Tax Refund in Florida in 1999.
Other Information Sources
Violation Tracker summary page
Watchdog Groups and Campaigns
Key Books and Reports
A Day Late and A Dollar Short: Discount Retailers are Falling Behind on Safer Chemicals by the Campaign for Healthier Solutions (February 2015)
Last updated November 11, 2015
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