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Other liquor stores in northern Indiana had an average
margin in the range of 25 percent, but those stores did not
operate with the low-price, high-volume philosophy of
petitioners' stores.
Nick's Liquors' cigarette pricing stayed the same between
1990 and 1994. In 1994, a competitor sued Nick in an Indiana
court, alleging that Nick sold cigarettes at such low prices that
he had violated Indiana's Unfair Practices Act. Indiana law
required cigarette profits to equal or exceed an 8-percent
addition to the retailers' cost, as a "retail cost of doing
business". Indiana statutes provided an exception, however, that
permitted a retailer to sell cigarettes below this 8-percent
addition in order to meet competition, as long as the retailer
sold the cigarettes above the retailer's own cost. Ind. Code
Ann. sec. 24-3-2-7 (Michie 1996). The Indiana court found that
Nick's Liquors qualified for this exception.
In connection with that litigation, petitioners presented
the evidence of an accountant, who calculated Nick's Liquors'
gross profit margins on cigarette sales in August and December of
1994. The average margin for August of brand-name cigarettes was
6.67 percent, and its margin for generic cigarettes was 6.39
percent. For December the average margin of brand-name
cigarettes was 2.92 percent, and its margin for generic
cigarettes was 2.57 percent. These very low margins for December
reflected the existence of the price war that caused petitioners'
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