Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, October 13, 1993 TAG: 9310130038
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
SOURCE: Associated Press
DATELINE: CONWAY, ARK. LENGTH: Medium
Judge David Reynolds said Wal-Mart violated Arkansas state law by selling some drugs and health and beauty aids below cost at its store in Conway. He ordered an end to the practice and awarded the plaintiffs, three independent Arkansas pharmacies, nearly $300,000 in damages.
The decision was the first predatory pricing ruling against Wal-Mart, which critics have blamed for the demise of many long-established merchants in small towns and cities nationwide. But it was unclear whether the decision, which applied only to Arkansas, might lead to similar rulings elsewhere.
Wal-Mart officials said during a two-day trial in August that some items were priced below cost to draw customers, not drive local druggists out of business.
The company said it would appeal to the Arkansas Supreme Court. Robert K. Rhoads, Wal-Mart's general counsel, warned of higher prices at stores throughout Arkansas.
Reynolds based his ruling in part on Wal-Mart's in-store displays comparing its prices to those of local retailers. The judge also noted that Wal-Mart had different prices in different localities, and he pointed out the company's advertised policy of meeting or beating the competition without regard to cost.
Wal-Mart which reported sales of $55 billion last year, became the nation's biggest retailer in 1991, largely through its low-price policy.
The lead plaintiff claimed victory for small, independent retailers nationwide.
"It's important to beat Wal-Mart. They were literally driving the small people out of business," said druggist Dwayne Goode, who owns American Drugs in Conway.
Goode said he got fed up with trying to compete with Wal-Mart's pricing and sued two years ago. "There's no way anyone can keep their prices down with Wal-Mart and survive," he said.
Investors apparently shrugged off the decision and the possibility that it might lead to more lawsuits against Wal-Mart by smaller store owners. Wal-Mart stock closed at $25.75 a share on the New York Stock Exchange, down 75 cents.
Some retail analysts said the chances of the smaller stores prevailing would be slight if the case is appealed outside state courts.
Terence McEvoy of the brokerage firm Janney Montgomery Scott Inc. in New York predicted the U.S. Supreme Court would reverse the decision if the case comes before that court.
The ruling is "blatant restraint of trade, which at one time was allowed and in the current environment no longer is," McEvoy said. "It's a state law and today's environment is much different than when that law was written. Court decisions tend to go with the times."
Matthew Adlong, a lawyer for the three pharmacies who sued Wal-Mart, said small retailers nationwide were awaiting the case's outcome to decide whether to proceed with similar cases against Wal-Mart and other retailers.
The other two plaintiffs were Jim Hendrickson, owner of Baker Drug Store in Conway, and Tim Benton of Mayflower Family Pharmacy.
Their lawsuit claimed Wal-Mart's pricing policy violated Arkansas' 56-year-old Unfair Practices Act, which bars merchants from selling items at a loss with the intent of harming competitors.
by CNB