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Judge Rules That Wal-Mart is Guilty of “Predatory Pricing″

October 12, 1993

CONWAY, Ark. (AP) _ The nation’s largest retailer sold merchandise below cost in an effort to drive competitors out of business in violation of a state law, a chancery judge ruled today.

Judge David Reynolds ordered Wal-Mart Stores Inc. to stop selling drugs and health and beauty aids below cost at its store in Conway.

The ruling was in a lawsuit filed by three local pharmacies which accused Wal-Mart of ″predatory pricing.″ The judge today awarded more than $289,000 in damages to the pharmacies.

Wal-Mart said it would appeal the decision, which would offer the first such test of the state Unfair Practices Act.

Reynolds said Wal-Mart violated the law, which bars selling items at a loss with the intent of harming competitors.

Reynolds said the local Wal-Mart store advertised and sold pharmaceuticals and health and beauty aids below cost ″for the purpose of injuring competitors and destroying competition.″

Wal-Mart’s general counsel, Robert K. Rhoads, said the decision would be appealed immediately to the state Supreme Court.

″If this decision is allowed to stand, the result will be higher prices, not just for Wal-Mart customers but customers″ at retail stores throughout the state, he said.

The suit was brought by Dwayne Goode, owner of American Drugs Inc. of Conway; Jim Hendrickson, owner of Baker Drug Store of Conway; and Tim Benton of Mayflower Family Pharmacy. They accused the retailer of scheming to drive them out of business by sell below cost.

″This is not only a victory for pharmacists here in Faulkner County, but it is a victory, I feel, for all the pharmacists in the state, and in the nation,″ Goode said today.

Reynolds said he based his ruling on:

- The number, frequency and extent of below-cost sales.

- Wal-Mart’s stated pricing policy to ″meet or beat the competition without regard to cost.″

- His finding that Wal-Mart’s below-cost sales are intended ″to attract a disproportionate number of customers to Wal-Mart.″

- Wal-Mart’s in-store price comparison of products sold by competitors, including the plaintiffs in the suit.

- A variation in prices between the Conway area and other markets with more and less competition.

Wal-Mart, based in Bentonville, has been blamed for the demise of some long-established merchants in small cities around the country. The company’s plans to move into the nation’s Northeast met recently with protests from retailers who feared they would be unable to compete.

Wal-Mart chief executive David Glass and other company officials testified during a two-day trial in August. They acknowledged they sold some items below cost but that they didn’t do it to try to drive others out of business. They contended the pharmacy market in Conway was thriving.

Afterward, Wal-Mart attorney Peter Kumpe warned that a judgment against the company could make litigation the method of choice industry-wide for striking back at competition.

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