Cengage Advantage Books: Business Law Today, The Essentials 10th Edition by Roger LeRoy Miller

تمرين 17

Spotlight on Weyerhaeuser Co.
FACTS Weyerhaeuser Company entered the Pacific Northwest's hardwood lumber market in 1980. By 2000, Weyerhaeuser owned six mills processing 65 percent of the red alder logs in the region. Meanwhile, Ross- Simmons Hardwood Lumber Company operated a single competing mill. When the prices of the logs rose and those for the lumber fell, Ross-Simmons suffered heavy losses. Several million dollars in debt, the mill closed in 2001. Ross-Simmons filed a suit in a federal district court against Weyerhaeuser, alleging attempted monopolization under Section 2 of the Sherman Act. Ross-Simmons claimed that Weyerhaeuser used its dominant position in the market to bid up the prices of logs and prevent its competitors from being profitable. Weyerhaeuser argued that the antitrust test for predatory pricing applies to a claim of predatory bidding and that Ross- Simmons had not met this standard. The district court ruled in favor of the plaintiff, the U.S. Court of Appeals for the Ninth Circuit affirmed, and Weyerhaeuser appealed to the United States Supreme Court.
ISSUE Does the antitrust test that applies to a claim of predatory pricing also apply to a claim of predatory bidding?
DECISION Yes. Because Ross-Simmons conceded that it had not met this standard, the Supreme Court vacated the lower court's judgment and remanded the case.
REASON Both predatory pricing and predatory bidding involve a company's intentional use of pricing for an anti competitive purpose. Both actions require a company to incur a short-term loss on the possibility of later making a "supracompetitive" profit. Because a "rational" firm is unlikely to "make this sacrifice," both schemes are "rarely tried and even more rarely successful." A failed scheme of either type can benefit consumers. Thus, the two-part predatory-pricing test should apply to predatorybidding claims. A plaintiff alleging predatory bidding must then prove that the defendant's "bidding on the buy side caused the cost of the relevant output to rise above the revenues generated in the sale of those outputs." The plaintiff must also prove that "the defendant has a dangerous probability of recouping the losses incurred in bidding up input prices through the exercise of monopsony power."
WHY IS THIS CASE IMPORTANT? Predatory-bidding schemes of the type that Ross-Simmons alleged Weyerhaeuser had committed are rare. Under the standard that the Court imposed in this case, a plaintiff's successful claim will likely be even more rare. But this may not be a negative development, at least for consumers. A predatory-bidding scheme can actually benefit consumers-a predator's high bidding can cause it to acquire more inputs, which can lead to the manufacture of more outputs, and increases in output generally result in lower prices to consumers.