July 14, 2009, 12:00 AM

Was health care the hiccup in the NRF/RILA merger?

The Retail Industry Leaders Association says no, and the National Retail Federation says probably not. But observers could not help but notice the sharp tone of NRF’s public criticism of RILA founding member Wal-Mart over its stance on health insurance.

When two major retailer organizations called off their planned merger late last month without explanation, few industry insiders were even willing to guess at what many considered a surprise break-up. But now some are suggesting that the merger between the National Retail Federation and the Retail Industry Leaders Association may have been derailed by a deep division over health care policy.

The NRF made clear this week it disagrees sharply on health insurance with Wal-Mart Stores Inc., the retail giant that founded RILA (then called the Mass Retailing Institute) in 1969 as an alternative for large retail chains to the NRF, whose members include many small and midsized merchants.

After Wal-Mart signed a letter recently to President Obama supporting proposals to require employers to offer workers health insurance, NRF president Tracy Mullin sent NRF members a letter yesterday directly attacking Wal-Mart. The letter was posted to the NRF web site, making the critique public.

Speaking of Wal-Mart’s letter to Obama, Mullin wrote, “Although the move may provide a short-term public relations boost to Wal-Mart, it could have long-lasting devastating consequences to retailers throughout the country.”

“This stunning turn of events left NRF with a decision to make,” Mullin went on. “We could stand idly by and allow Wal-Mart to tip the scales on the health care debate, cower and release an innocuous statement that would neither support nor condemn their decision, or stand up for all retailers and come out swinging.”

“The truth is the decision wasn’t all that difficult. In fact, there was never really any choice. NRF is the retail industry’s association, which means that we represent all retailers-large and small-not just a select few. (Wal-Mart is not a member of NRF and, after this dispute, I’m not expecting a dues check from them anytime soon.)”

This disagreement over health insurance reflects the differences in the memberships of the NRF and RILA, says consultant Jim Okamura of the J.C. Williams Group Ltd. “I could easily see that as being a contributor to the merger being called off,” Okamura says. “The NRF’s broader constituent base means they’ve got to stand up for all the little retailers who would be impacted by those health insurance requirements.” Whether or not health care was the decisive issue, the difference in the organizations’ constituencies no doubt was at the root of the breakup, Okamura says.

The RILA flatly denied that it was the health care issue that ended the merger talks. “I can say definitively that this or any other public policy issue had no impact on the merger whatsoever,” said John Emling, RILA’s senior vice president for government affairs, said in a statement. “Any suggestion otherwise would be uninformed speculation.”

As for health insurance mandates, Emling’s statement seemed to stake out a position in between those of NRF and Wal-Mart, a member of the RILA board. “Although we have not expressly opposed the employer mandate proposal, we are skeptical of a one-size-fits-all approach that could create barriers to hiring entry-level employees,” Emling said.

An NRF spokesman says he does not know why the two organizations changed their minds about merging, other than that after two months of discussions they decided the combination did not constitute a good fit. As for the dispute over health care, he says, “I don’t believe that was the specific cause why the merger didn’t happen, but obviously it demonstrates a difference between the organizations.” He adds that the merger was called off before Wal-Mart’s letter was sent to Obama, “so clearly it wasn’t a direct result of that.”

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