6.12. SR 10-18-1999 - Laserfiche WebLink

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Chapter 10 Page 17 of25 interviewed a number of valiant survivors. In Part II of Chapter IV, the reader certainly has to recognize the discouragement and disillusionment of the respondent retailers about the end of their "American Dream." . Taylor and Archer, while truly attempting to encourage small retailers to survive, nevertheless did recognize the present devastation going on in malls, strip centers and the former "Main Streets" of middle America. Furthermore, it is easy to see that observers are shocked by the decline and elimination of most small retail stores in the ethnic and minority enclaves of our very large cities in the East, Midwest and the West. The elimination of small retail stores in the neighborhoods results in job loss and contributes to the ultimate conversion of a formerly socially stable neighborhood into a ghetto, beset by violence, crimes, drugs and an underground economy. Predatory Pricing - A State and Federal Legal Review Chapter V introduced the subject of legal review of mega-retail discount chain behavior in the pricing area. In the case of American Drugs, Inc. v. Wal-Mart Stores, Inc., an Arkansas predatory-pricing case, Wal-Mart lost in the lower Chancery Court. This introduced the subject of "sales below cost" claims, and whether or not anything could be learned that might provide reviews of below cost pricing under the Sherman, Clayton, Robinson- Patman or Fed;.:ral Trade Commission Acts. Up to this point, it appears that "sales-below-cost" claims."" appear r~'asier to maintain under state laws rather than under federal antitmst laws. The subject is tremendously complicated. Also, monopolization and predatory pricing under federal antitrust laws should not br. c0nfused with potential remedies understate unfair trade laws. . In Arkansas, the Chancery Court rejected the "market basket" approach to analyzjng "sales below cost." Rejec~ion of the "market basket" approach means that an aggrieved plaintiff can recover in a state "sales below cost" claim regarding a particular product overall even if the retailer maimai:'ls a healthy profit margin. Additionally, in the Arkansas case (in the lower Chancery Court), the judge determined that the plaintiffs need not show monopoly power to do damage to competition (involving complicated expert analysis of relevant markets and so forth). Instead the plaintiffs only needed to show the company had an intent to injure the competition, which could be inferred more directly from the company's stated policies and purposes. However, Wal-Mart won its appeal at the Arkansas Supreme Court level. Both the majority decision and the dissenting opinion in the Supreme Court case did create interest in the subject of predatory pricing and should stimulate the Federal Trade Commission and possibly the U.S. Justice Department to review appropriate federal regulatory statutes which might result in greater protection for the small retailer. Further, most states have enacted "baby" Sherman Acts which track the federal statute and the below-cost sales provisions. These are often contained in more general pricing statutes which are similar to the federal Robinson-Patman price discrimination law-- either of which may be used advantageously to challenge truly predatory pricing behavior. Chapter V, also mentioned that a group of retailers took a different tack on pricing ditlerentials by suing both manufacturers and wholesalers. This study shows that more and more of the chain's ability to lower prices is due to the massive discounts available to them for large volume purchases. Not only are these unit prices not available to small retailers, but wholesalers, who used to sell the small retailer . are disappearing, as the chains buy "direct" from the manufacturer. In August 1994, the House Small Business Committee met and listened to witnesses who were http://www.shilsreport.org/chapl0.html 10/6/99