Wal-Mart agreed this week to pay $15,000 to settle a case of below cost pricing brought against it by 5 stores in West Bend, Wisconsin. (see the September 27, 2000 newsflash for the first reporting of this story). A local pharmacist in West Bend, Kim Slaugenhoup, charged back in 1998 that Wal-Mart was selling milk below cost, in violation of a Wisconsin state law. “There’s no way they could be buying it that cheap and turning a profit,” Slaugenhoup told the Milwaukee Journal Sentinel. The State’s Division of Trade and Consumer Protection reached a “settlement” this week with Wal-Mart, 3 years after Slaugenhoup filed her complaint. Wisconsin law allows a retailer to sell an item below cost, but only as a response to below cost prices at their competitors. Wal-Mart would have had to document sales receipts from merchandise purchased below cost at competitors, or clipped ads running below cost prices to show they were responding to other merchants’ prices. That’s what Slaugenhoup did to nail Wal-Mart: she bought milk at Wal-Mart and kept the receipt. Similar claims against Wal-Mart pricing were filed by at least 4 other merchants in the area. In September of 2000, state officials filed a complaint against Wal-Mart, charging that the company sold milk, butter, cigarettes, laundry detergent and other items below cost in West Bend, Racine, Beloit, Tomah and Oshkosh. Slaugenhoup said that after Wal-Mart opened one block from her pharmacy, she had to remove the milk cooler in her store, because sales fell by 80%. This caused her to lose “cross-traffic” sales for other items in her store. After the below cost complaints were filed against Wal-Mart, the company responded by filing more than 300 complaints of illegal pricing policy against other stores. According to state officials, “a large number of them” were thrown out because of lack of documentation. Wal-Mart critics say the company, which had been facing up to $175,000 in fines, got off easy with the settlement. Wal-Mart has to essentially pay $15,000 to cover the state’s cost of investigating the retailer, and has to do a better job of record-keeping to track its pricing practices. The company apparently had to buy a new, costly computer system to track its prices. Slaugenhoup told the newspaper she was disappointed that Wal-Mart did not have to pay any damages to stores like hers that lost a lot of business due to the Wal-Mart pricing practice. “They did a number on us,” the pharmacist said.
At least 17 states have below cost pricing laws, but as in the Wisconsin case, you have to show that the pricing has been done to unfairly take business away from competitors. Such cases are not easy to prove, and often take years to investigate. Wal-Mart maintains that they did not violate state law. The company said “our pricing was fair but aggressively pro consumer.” But if Wal-Mart thought they had broken no law, why did they agree to a $15,000 settlement? Perhaps they were concerned about what might occur if the case went to its scheduled September hearing. That hearing is now cancelled. Fair competition is predicated on a diverse marketplace with many players. As more and more market share falls into the hands of a few large players, the diversity in the marketplace disappears, which can only have a negative impact on prices, and on consumers. Everytime we shop at big box retailers, we are helping to narrow competition in the marketplace.
