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A Battery of Lawsuits Against Energizer and Walmart for Price-fixing

Antitrust law book and gavel in court.
By FindLaw Staff | Last updated on

Shopping at Walmart can often feel too good to be true. Not because of the product quality or the shopping experience itself (certainly not, some might emphasize), but because of Sam Walton's famous marketing strategy of "everyday low prices" and mission to provide his shoppers the same products for much lower prices than his competitors.

For the most part, this isn't just an empty promise. Most products sold throughout Walmart stores really are competitively prices — with one exception: Energizer batteries. This particular brand has not been getting "rolled back," but just the opposite. According to a trio of new lawsuits, the cost of Energizer batteries has been artificially inflated across the board to allow Walmart to enjoy the maximum profit possible.

A Class Action Trifecta

All three lawsuits are class action cases naming Walmart and Energizer as co-defendants. The plaintiffs throughout the suits include one group representing consumers who purchased Energizer batteries directly from Walmart, another group representing consumers who purchased Energizer batteries from other stores, and a group representing direct sellers of Energizer batteries.

Walmart and Energizer have responded with a joint motion to dismiss, arguing that the claims were "baseless" because the complaints lacked the requisite factual allegations necessary to allege such a claim.

Since we have a triple-threat case about batteries, let's look at the AAA of the suit: the allegations, the answer, and the anticipated outcome.

Allegations

All three complaints argue that Walmart and Energizer conspired to artificially inflate the prices of Energizer batteries in direct violation of various state anti-trust laws and the federal Sherman Antitrust Act. Under United States anti-trust laws, companies are forbidden from manipulating the free market value of goods and services through artificial means such as price-fixing.

According to the complaints, Energizer and Walmart came up with a specific, two-part scheme to increase the profitability of both companies for disposable batteries through artificial means.

In the first part, Energizer allegedly agreed to inflate the cost of disposable batteries for all direct retailers of their batteries other than Walmart. This predictably prompted those direct retailers to increase the price of these batteries they sold to consumers, since that was necessary for them to continue making a profit. In return, Walmart agreed to buy batteries from Energizer at a higher cost than it normally would, but still at a lower cost than its competitors. Since Walmart could thus maintain a lower price point on these batteries sold to their customers while still maintaining a profit, customers would naturally choose Walmart over its competitors as their source of Energizer batteries. This, of course, increased Walmart's market share of the batteries, and therefore the company's profits.

In the second part, Energizer agreed to monitor its other direct retailers to make sure that they did not sell Energizer batteries to consumers at prices lower than Walmart's. If any direct retailer undersold Walmart, Energizer would punish them by inflating the costs to that direct retailer to a point where it was no longer economically viable to sell the batteries either because they weren't making a profit or because they were charging so much that customers would not buy from them. Energizer created a special group named "Project Atlas" to continuously investigate direct retailer's prices to ensure Walmart enjoyed a competitive edge. As evidence of this scheme, the complaints point to internal emails and direct quotes from Energizer salespeople which describe Walmart pressuring Energizer to engage in this scheme.

Energizer would benefit from this scheme not only by getting more money from all retailers (including Walmart) for its batteries, but also by undercutting its main competitor in the battery market: Duracell. Walmart allegedly protected Energizer by charging equally inflated prices for the Duracell batteries it sold. Thus, Duracell was not able to compete effectively with Energizer through Walmart as a retailer. In such a scheme, both customers of Walmart and customers of other stores would only stand to lose. (Note that Duracell is not a party to any of the lawsuits.)

Answer

Both Walmart and Energizer have responded to the complaints, asking the court to dismiss them. They argue that the complaints should be dismissed because they failed to actually provide any factual basis to support the antitrust claim.

Under the Federal Rules of Civil Procedure, defendants to a civil suit in federal court can move to dismiss the complaint if it fails to meet certain requirements. One such requirement is that it must allege facts that show that the defendant took action that is in violation of the specific law alleged in the complaint.

According to Walmart and Energizer, the complaints should be dismissed because the factual allegations do not show that the defendants did anything to violate the Sherman Act. More specifically, the defendants argue that there was no unlawful contract (as required by Section 1 of the Act) because the complained upon actions could be considered rational business decisions.

Anticipated Outcome​

The defendants jointly filed a motion to dismiss, calling the allegations "baseless" because they didn't include sufficiently specific information. Even if the court agrees, however, it will give the plaintiffs an opportunity to modify their complaints to include whatever other facts are necessary.

In any case, the motion will not be argued until November, and this is just a pre-trial motion, so there is a long way to go before the matter will be finalized. If the court finds evidence of artificial price inflation, it's possible that the two companies will be accountable for unlawful monopolistic (or rather, duopolistic) practices. However, this is a fact-specific determination. More facts will be revealed throughout the next year that will help determine if the scheme was indeed unlawful, or instead just a rational, legal business decision.

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