Jan 25, 2010

Recently, a Christian retail trade association known as CBA filed a complaint with the Justice Department, accusing Wal-Mart, Inc. and Target Corp. of predatory pricing because they routinely sell popular books below cost.

Even if the retailers sold books below cost, that's not necessarily illegal, said MIKE SHOR, an assistant professor of economics at Vanderbilt University. To violate the Robinson-Patman Act, a company has to intentionally try to damage other businesses.That's hard to prove, Shor said.

"To successfully prosecute a Robinson-Patman case, there has to be a smoking gun," he said.

Companies often have good reason to sell below cost. For example, Shor said, grocery stores sometimes sell milk as a loss leader — a product sold below cost to entice customers to their stories. The store loses money on the milk, but makes money on other products.

If the CBA could prove that publishers were selling books to big retailers at extreme discounts not available to other stores, the association would have a stronger case, Shor said.

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