Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co.
Headline: Court applies strict predatory-pricing test to predatory bidding, requiring below-cost output pricing and likely recoupment, making it harder for a supplier to win antitrust claims against a large buyer who paid more for inputs.
Holding: The Brooke Group two-part test for predatory pricing applies to predatory bidding, so liability requires below-cost output pricing and a dangerous probability of recouping losses.
- Makes it harder for suppliers to win predatory-bidding claims.
- Requires proof of below-cost output pricing before liability.
- Courts must show a dangerous probability of recouping losses.
Summary
Background
A small sawmill (Ross-Simmons) sued a much larger lumber company (Weyerhaeuser), saying the large buyer purposely drove up the price of alder sawlogs so the sawmill could not make money and was forced to close. Logs were a large share of mills’ costs, Weyerhaeuser bought a big share of available logs, log prices rose while lumber prices fell, and a jury originally awarded a large verdict to the sawmill.
Reasoning
The Court asked whether the two-part test the Court uses for predatory pricing also applies when a buyer overpays for inputs to harm rivals. The Court said yes. It explained that buying power (monopsony) mirrors selling power (monopoly), that both schemes require short-term losses in the hope of later supracompetitive gains, and that loosening the rule would chill normal competitive bidding. So plaintiffs must show (1) that the buyer’s higher input bidding caused the seller’s output prices to be below cost, and (2) a dangerous probability the buyer can recoup losses through buyer power.
Real world impact
The ruling means suppliers who say a big buyer overpaid will face a tougher test in court. Because Ross-Simmons conceded it could not meet the two-part test, the Court said the verdict cannot stand and sent the case back for further proceedings. The decision sets a national rule for how courts assess predatory-bidding claims going forward.
Dissents or concurrances
The opinion was unanimous and written by Justice Thomas; there were no separate dissents or opinions.
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