Undercutting Prices of Competition Is Legal, Justices Rule

Price-cutting schemes that hurt a competitor’s business do not necessarily violate federal antitrust laws, the Supreme Court ruled.

By a 7-2 vote, the justices today killed a lawsuit against Atlantic Richfield Co. by independent gasoline stations in California and Washington state.

The court said that only when a company’s price-cutting can be proved to be “predatory” and harmful does it violate the Sherman Act, a major antitrust law.

USA Petroleum Co., an independent oil dealer, accused Arco of conspiring with Arco gas station dealers to fix prices illegally to drive the smaller independents out of business.

Arco contended that its plan--lower gasoline prices to attract more customers and discontinuing credit card sales to save money--is legitimate.

Arco lawyers said the major company’s share of the retail gas market in California and Washington was 10% to 12% in 1981 and increased to 14% to 16% in 1983 because of lower prices.