‘Predatory Pricing’ Ruling Against Wal-Mart Voided

In a case with broad national implications, the Arkansas Supreme Court ruled Monday that Wal-Mart Stores’ price-cutting practice is a marketing tactic, not a strategy for eliminating competitors.

The 4-3 decision by the top Arkansas court reverses a 1993 lower court ruling that the discount chain was engaging in illegal “predatory pricing” on some prescription medicines.

The suit was brought by three Arkansas pharmacists who alleged that Wal-Mart intended to use the discounts to drive them out of business and then raise prices once a monopoly had been achieved.

The high court concluded that Wal-Mart had priced some pharmaceutical items below cost, but it said the practice was “markedly different from a sustained effort to destroy competition in one article by selling below cost over a prolonged period of time.”

The ruling affirms Wal-Mart’s claim that the low-priced items cited in the suit were “loss leaders,” or popular products unprofitably priced to attract consumers who would then buy other items.

“We’re very disappointed,” said Tim Benton, owner of Family Pharmacy in Mayflower, Ark., and one of the plaintiffs. “It wasn’t just about pharmacies. It was about the big guy squeezing out the little guy.”

But the court ruling was hailed by the Washington-based International Mass Retail Assn., a discount chain trade group that filed legal arguments on behalf of Wal-Mart.

“The loss leader is an important practice, and we wanted to preserve it for Wal-Mart and for Wal-Mart’s competitors,” said Moe Cain, vice president of legal affairs for the group.

Wal-Mart said any decision that sustains loss-leader marketing benefits the consumer.

“The underlying issue in the case was whether consumers should pay higher prices to protect business owners from competition,” said Don Shinkle, a Wal-Mart spokesman.