Wal-Mart and the Divergence of State and Federal Predatory Pricing Law

Aggressive and Predatory Pricing: Insights and Empirical Examination in the Airline Industry

“…Concerns about the legal standard, as well as emerging insights and understanding developed in economics, marketing, and other fields, have prompted inquiry and newer thinking about predatory pricing. In general, this thinking posits that the previous foundations on which the current legal standard rests may be based largely on theoretical constructs and assumptions that are not sufficiently inclusive of the realities of a marketplace in which oligopolistic structures, incomplete information, and strategic behavior are commonplace (see Bolton, Brodley, and Riordan 2000; Grewal and Compeau 1999; Hawker 1996; Sullivan and Grimes 2000). Drawing on industrial organization theory in economics, which relaxes the perfect information and static assumptions of neoclassical price theory but still regards managers as profit maximizers, and applying game-theoretic interpretations of strategic behavior, this newer thinking implies that predation may occur because of the lack of perfect information and the dynamic interplay of the market.…”

Predatory Pricing and Marketing Theory: Applications in Business-to-Business Context and Beyond

“…State courts have generally been less demanding and more hospitable to predatory pricing plaintiffs than the Federal courts (Sheffet and Petty 1994). For example, Wal-Mart was found guilty in an Arkansas district court even after the Brooke decision, in a verdict that was later reversed by higher courts (Hawker and Petty 1996). Many states have laws to treat predatory pricing in the form of sales below cost statutes or minimum mark-up laws (Haynes 1988).…”

The Implications of Wal-Mart's Takeover of ASDA

“…This requires that the operation is efficient and effective and that no unnecessary costs are incurred ö by anyone associated with the business. Cost control is therefore of critical importance, allied to a determination to offer the lowest price possible and to focus on reducing prices for the customer [in many cases, known value items (KVIs) are sold at or below cost (Hawker, 1996) and store managers have the power locally to price match or beat]. Suppliers do not give up ownership of their goods until they are sold to the customer, improving Wal-Mart's cashflow and shrinkage figures and, at the same time, focusing suppliers' attention on customers, stocking levels, and supply systems.…”

“…This has caused it problems. Although pricing tactics have changed in the United States over time (Boyd, 1997), it remains the case that predatory pricing can be illegal (Hawker, 1996). Wal-Mart has been under investigation for predatory pricing (Boudreaux, 1996) and has indicated that it does sell some items below cost nationally.…”