Criticism of Walmart - Allegations of Predatory Pricing and Supplier Issues

Allegations of Predatory Pricing and Supplier Issues

In May 2010, Walmart's US stores pulled its "Miley Cyrus" line of necklaces and bracelets, three months after the Associated Press informed the chain that the jewelry contained harmful amounts of the toxic metal cadmium. Long-term exposure to cadmium can lead to bone softening and kidney failure. It is also a known carcinogen, and research suggests that it can affect brain development in the very young. Cadmium in jewelry is not known to be dangerous if the items are simply worn, but concerns come when youngsters bite or suck on the jewelry, as many children do. Walmart said that while the jewelry is not intended for children, "it is possible that a few younger consumers may seek it out in stores." "We are removing all of the jewelry from sale while we investigate its compliance with our children's jewelry standard," Walmart said. The tainted jewelry was made at a Chinese manufacturer.

Walmart has been accused of selling merchandise at such low costs that competitors have tried to sue it for predatory pricing (intentionally selling a product at low cost in order to drive competitors out of the market). In 1995, in the case of Walmart Stores, Inc. v. American Drugs, Inc., pharmacy retailer American Drugs accused Walmart of selling items at too low a cost for the purpose of injuring competitors and destroying competition. The Supreme Court of Arkansas ruled in favor of Walmart saying that its pricing, including the use of loss leaders, was not predatory pricing. In 2000, the Wisconsin Department of Agriculture, Trade, and Consumer Protection accused Walmart of selling butter, milk, laundry detergent, and other staple goods at low cost, with the intention of forcing competitors out of business and gaining a monopoly in local markets. Crest Foods filed a similar lawsuit in Oklahoma, accusing Walmart of predatory pricing on several of its products, in an effort to drive Crest Foods's own company-owned store in Edmond, Oklahoma out of business. Both cases were settled out of court.

In 2003, Mexico's antitrust agency, the Federal Competition Commission, investigated Walmart for "monopolistic practices" prompted by charges that the retailer pressured suppliers to sell goods below cost or at prices significantly less than those available to other stores. Mexican authorities found no wrongdoing on the part of Walmart. However, in 2003, Germany's High Court ruled that Walmart's low cost pricing strategy "undermined competition" and ordered Walmart and two other supermarkets to raise their prices. Walmart won appeal of the ruling, then the German Supreme Court overturned the appeal. Walmart has since sold its stores in Germany.

Walmart has been accused of using monopsony power to force its suppliers into self-defeating practices. For example, Barry C. Lynn, a senior fellow at the New America Foundation (a think tank), argues that Walmart's constant demand for lower prices caused Kraft Foods to "shut down thirty-nine plants, to let go 13,500 workers, and to eliminate a quarter of its products." Kraft was unable to compete with other suppliers and claims the cost of production had gone up due to higher energy and raw material costs. Lynn argues that in a free market, Kraft could have passed those costs on to its distributors and ultimately consumers.

For example, most Walmart store pharmacies fill many generic prescriptions for $4 for a month's supply. However, in California and ten other states, complaints from other pharmacies have resulted in Walmart being required to charge at least $9 for a month's supply of certain drugs.

The 2010 remodelings of their smaller stores shifting emphasis away from non-grocery products towards carrying grocery items carried by their supercenters, has created a small backlash amongst some customers. The smaller and larger sizes in the adult clothing were discontinued as well as other available styles, forcing adult customers to look for clothing in the children's section, or shop with more expensive specialty "Big and Tall" stores for basic items such as jeans.