SUPREME COURT RULES WAL-MART WINNER IN ARK.
Byline: Joanna Ramey
WASHINGTON — The Arkansas Supreme Court Monday overturned a lower court decision that Wal-Mart Stores had illegally tried to drive three competitors out of business through predatory pricing.
The court voted 4-3 in favor of Wal-Mart. Attorneys for the three Conway, Ark., pharmacists who challenged Wal-Mart said a decision has not been made whether to appeal the case to the U.S. Supreme Court.
Wal-Mart argued its aggressive below-cost promotional pricing falls within the state’s antitrust rules.
“This is a victory for America’s competitive free enterprise system and, most important, a victory for the American consumer,” the company said in a statement. “Wal-Mart believes that quality merchandise and low prices are driven by a competitive market place and we compete fairly and aggressively to insure that the consumers of America are winners.”
The state’s high court said the lower court erred in broadly interpreting a 1937 state law when it decided last October Wal-Mart intentionally tried to drive the pharmacists out of business by going beyond the legally recognized retail practice of below-cost pricing of some goods, known as loss leaders.
If upheld, the decision would have likely triggered similar cases throughout the country, according to antitrust experts.
“What is evidenced is that Wal-Mart regularly would sell varying items below cost as loss leaders to entice people into its store and increase traffic,” the state Supreme Court said. “Our statute does not make loss leaders illegal.
“The loss-leader items would change on a regular basis. That strategy of selling below the competitors’ price and even below Wal-Mart’s own cost, which Wal-Mart admits to, is markedly different from a sustained effort to destroy competition in one article by selling below cost over a prolonged period of time.”
The court also stated that the pharmacists remain profitable, although their profits have shrunk due to competition from a variety of new market entries, not just Wal-Mart.
“Other large drug outlets in the vicinity have entered the competitive fray, including Fred’s, Kroger and Harvest Foods. Faulkner County appears far from a dire situation where no competition exists in pharmaceuticals; indeed competition there appears to be thriving,” the court ruled.
In arguing against Wal-Mart, the three dissenting state justices said the lower court judge was correct in finding the discounter ran afoul of the law because of the number and frequencies of below-cost sales, the extent of these sales and the chain’s stated purpose of attracting a disproportionate number of customers.
The dissenting justices cited Wal-Mart chief executive officer David Glass’s testimony as evidence the chain intended to injure its competition in violation of the state antitrust law.
The testimony the dissenting judges cited included Glass’s use of terms like “aggressive,” “do whatever it takes,” “kill the competition’s momentum” and “war zones” in describing Wal-Mart’s competitive strategy. — Fairchild News Service