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Succeeding on predatory bidding claims just got more difficult

The changing faces of the Supreme Court have not changed the Court’s stance on predatory conduct. Under a previous Supreme Court decision, a plaintiff bringing a claim under Section 2 of the Sherman Act based on predatory pricing must show that its competitor was operating its business at a loss and such competitor was likely to recoup those losses after it had driven its fellow competitors out of the market. In Brooke Group Limited v. Brown and Williamson Tobacco Corporation, 509 U.S. 209 (1992), the Supreme Court found that a predatory pricing scheme could not survive within the constraints of economic realities because for such a plan to make any economic sense, the losses suffered from a predator’s deliberate below-cost pricing must be recovered, with interest, during the supracompetitive-pricing period of the plan.


Now, fifteen years later, in Weyerhaueser v. Ross-Simmons Hardwood Lumber Company Incorporated, 127 S.Ct. 1069 (2007), the Supreme Court unanimously holds that the strict test which applies to predatory-pricing cases also applies to predatory-bidding cases. To that end, the Court ruled that a plaintiff alleging violation of the antitrust laws on a predatory-bidding theory must now prove (1) the alleged predatory bidding led to below-cost pricing of the predator’s output and (2) the predatory bidder has a dangerous probability of recouping the losses it incurred from bidding up its input prices through the exercise of its monopsony power. (Monopsony power is akin to monopoly power in that it is market power on the “buy-side” of the relevant market).

Unlike a predatory-pricing scheme, a predatory-bidding scheme involves the exercise of market power on the “buy-side” of the relevant market. Such a scheme arises where the purchaser of a critical resource pays significantly more than the prevailing market price for the resource. Its rivals cannot purchase the needed resource at such high levels and, thus, are forced out of business. The predator, consequently, acquires, maintains or increases its monopsony power in the relevant market.

Weyerhaueser involved the purchase of red alder sawlogs by certain mills that process logs in the Pacific Northwest on the open bidding market. The plaintiff, Ross-Simmons, had been operating a hardwood-lumber sawmill in Washington state since 1962. In 1980, Weyerhaueser entered that geographic market by acquiring an existing lumber company. Weyerhaueser gradually increased the scope of its operations and by 2001 had acquired approximately 65 per cent of the alder logs in that particular region. From the period of 1998- 2001, the price of these alder sawlogs increased, and Ross-Simmons continuously lost profits. Unable to pay the higher price for alder sawlogs, Ross-Simmons eventually went out of business.

Ross-Simmons sued Weyerhaueser for violation of the antitrust laws alleging that Weyerhaeuser intentionally bid up the price of sawlogs to a high level to prevent Ross-Simmons from making any profit, thus effectively driving Ross-Simmons out of business. Before trial, Weyerhaueser moved for summary judgment on Ross-Simmons’ predatory-bidding theory on the basis that Ross-Simmons failed to meet the strict standard announced by the Supreme Court in Brooke Group. The district court denied the motion and the case proceeded to trial. The jury found in favor of Ross-Simmons on its predatory-bidding claim. Weyerhaueser appealed and the Ninth Circuit Court of Appeals affirmed the verdict.

Both the district court and the Ninth Circuit in Weyerhaueser found a material difference between predatory-pricing and predatory-bidding claims, and, thus, maintained that a lesserstandard should be applied to predatory-bidding claims. In fact, the district court refused to instruct the jury with the proposed instructions that listed the more stringent elements of the Brooke Group test. The Ninth Circuit likewise refused defendants’ contentions that the Brooke Group test applied finding that “buy-side” predatory bidding and “sell-side” predatory pricing were materially different and, accordingly, the concerns present in Brooke Group which led the Supreme Court to impose such a high standard in the predatory pricing cases do not “carry over to this predatory bidding context with the same force.” The material difference to which the Ninth Circuit was referring is that predatory bidding, unlike predatory pricing, does not necessarily inure to the benefit of consumers or stimulate a competitive market place. The Supreme Court granted Weyerhaueser permission to hear the case and considered whether the standard for predatory pricing announced by the Supreme Court in Brooke Group was applicable to claims for predatory bidding as well. The high court, in an unusual showing of unison, determined that because predatory bidding was no different than predatory pricing, Ross-Simmons’ predatory-bidding theory would have to be litigated within the strict confines of Brooke Group.

In deciding that the Brooke Group standard of liability for predatory pricing is equally applicable to predatory bidding, the Supreme Court found that both claims were analytically comparable. The analytical similarity, the Court stated, stems from the “close theoretical connection between monopoly and monopsony.” Because these ideologies are akin to one another, parallel legal standards are appropriate for claims of both monopolization and monopsonization. Both predatory-pricing and predatory-bidding claims imply the intentional “use of unilateral pricing measures for anticompetitive” objectives. Likewise, both claims logically oblige firms to incur the loss of short-term profits on the chance that they may recoup supra-competitive profits on some tentative future date. The Court further found that the two theories mirror each other with respect to the significant concerns raised in Brooke Group. Notably, the Court stated that a rational business would seldom, if at all, sacrifice short-term profits in hopes of reaping supracompetitive profits in the future. Additionally, similar to the challenged conduct in predatory pricing cases, the very actions taken in predatory-bidding schemes are the “very essence of competition.” For example, where sellers use output prices in competing for purchases, buyers use input prices in competing for scarce inputs.

The practical implications of this decision are that a plaintiff levying an antitrust claim on the basis of predatory bidding certainly has an “uphill battle” because, over the years, the Brooke Group standard has proven fatal to predatory-pricing plaintiffs. As with claims for predatory pricing, predatory-bidding claims will now be analyzed with a watchful eye. Although these claims may be able to survive the liberal pleading standards under motion to dismiss, they are almost certain to fall prey to motions for summary judgment. As the Supreme Court has stated, it is a very difficult standard to meet and its elements are the essence of real market injury which are not to be treaded on lightly. This standard coupled with the considerations of the high costs stemming from erroneous findings of predatory bidding or predatory pricing, i.e. chilling of conduct which the antitrust laws are intended to guard, plaintiffs have a formidable battle in any of their antitrust claims predicated on these theories reaching the jury. Because only assertions that high bidding lead to below-cost pricing in the relevant output market will prove sufficient for predatory-bidding liability, the Weyerhaueser decision is likely a death-knell for predatory-bidding plaintiffs.

To learn more about Christie A. Moore and her practice, please visit her profile.

  • Partner

    Christie practices in the area of white collar crime defense and complex commercial litigation, representing clients in health care, antitrust, securities, intellectual properties, RICO, and False Claims Act matters. She has ...



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