|Predatory Bidding Due Same Test as Predatory Pricing|
Supreme Court held that to win in a predatory bidding case a plaintiff must show that the predator bid up input prices and incurred short run losses so as to capture more of the market and higher prices later.
Sherman Act; Monopolization; Predatory Bidding
|C A S E S U M M A R Y|
Ross-Simmons is a sawmill. It sued Weyerhaeuser, which owns sawmills, under §2 of the Sherman Act, alleging that it drove Ross out of business by bidding up the price of sawlogs to a level that prevented Ross from being profitable. Weyerhaeuser used state-of-the-art technology to increase efficiency and captured 65 percent of the alder log market in the region around Longview, Washington. Ross contended that the high prices Weyerhaeuser bid for logs made it impossible for Ross to compete in the market. The jury awarded Ross $26 million and the appeals court affirmed. Weyerhaeuser appealed to the Supreme Court.
Vacated and remanded. Predatory pricing is when a predator cuts prices to drive competitors out of business. In such a case, a plaintiff must show that the prices are set below cost and must show that the predator had a “dangerous probability of recouping its investment in below-cost pricing” after competitors have been driven from the market. Predatory bidding, as claimed here, is when a buyer bids up the market price of an input so high that rival buyers cannot survive at that high cost, thereby allowing the predator to acquire market power on the input side and driving out competitors so higher prices can then be charged when there is less competition. The analysis is similar for predatory pricing and bidding. Both require a showing that the predator incurred losses in the short run by this tactic in an effort to reduce competition, so as to have more market control in the future. Ross failed to show that these conditions were met in the sawlog market, so it cannot prevail.
Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 127 S.Ct. 1069 (2007)
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