Price flexing

“In the 1980’s, when Wal-Mart was opening superstores in small towns across the heartland, its primary competitors were drugstores and five-and-dime variety stores. To take their business, Wal-Mart sold up to one-third of the products in its health and beauty department at a loss, according to evidence presented in a court case brought by independent pharmacists in Arkansas, who accused the chain of violating antitrust laws. In a 4-3 vote, the Arkansas Supreme Court ruled that Wal-Mart’s below-cost pricing tactics were legal. The company has since gone on to use the same strategy to capture a dominant position in other product categories. In 2003, for example, it sold many of the items in its toy department below cost, sending Toys ‘R’ Us and other toy retailers into a tailspin. While Wal-Mart can recoup these losses in other departments, locally owned retailers and chains that specialize in one product category do not have that option.” – Stacy Mitchell Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses (Boston: Beacon Press, 2006), 135