SANFORD, N.C. -- Costco Wholesale Corp. is facing a lawsuit in Alabama that says the big-box retailer is selling gasoline at unlawful prices. The Pantry Inc., which operates 78 convenience stores in Alabama, filed the suit in U.S. District Court in Birmingham, Ala., last week.
The chain is seeking an injunction requiring Costco to comply with the Alabama Motor Fuel Marketing Act, which makes it illegal to sell gasoline to the public for less than it costs to buy it, truck it to a retail outlet and pay the costs associated with operating a store or gas [image-nocss] station, reported The Birmingham News.
Costco has offered to sell and has sold motor fuel to retail customers at prices that were lower than its cost, the suit said, according to the newspaper. These offers to sell...had the effect of injuring competitors.
The Alabama motor fuel law, passed in the 1980s, was upheld as constitutional in the 1990s.
Dean Mooty, the Montgomery lawyer representing The Pantry, said big retailers such as Costco use low gasoline prices to lure customers, hoping they will lay out cash for big ticket items. By comparison, he said c-stores must make a profit on gasoline sales to remain in business. Big chains such as Costco and Wal-Mart use gasoline in the truest sense as a loss leader, Mooty told the paper.
Costco, based in Issaquah, Wash., has two stores in Alabama: Huntsville and Hoover. The company operates 500 stores.
The Pantry Inc., Sanford, N.C., operates 1,493 stores in 11 states under several banners, including Kangaroo Express, its primary banner.
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