Testing Predatory Buying vs. Predatory Pricing

Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co.

Ross-Simmons, a sawmill, alleges that Wayerhaueuser violated the Sherman Act by attempting monopolistic practices by using its dominant position to drive up the prices. Here, Wayerhauser argues that the standard for predatory pricing in Brooke Group Ltd. V. Brown & Williamson Tobacco Corp also applies to claims of predatory bidding. Recognizing a two stage method of predatory pricing the Brooke Court held that to recover for predatory pricing a plaintiff must show (1) the prices were below costs, and (2) the competitor had a dangerous probability of recouping it investments ostensibly by engaging in supra-competitive pricing once it drove out competition.

The first factor is necessary because anything else would either be genuine competition or beyond the “practical ability of a judicial tribunal to control without

courting intolerable risks of chilling legitimate procompetitive conduct.” The second is meant to show an intent to engage in predatory pricing (since it would be highly unlikely that it would do so unless it could recover its losses). These two factors are necessary components of a market injury. Monopsony is a monopoly on the buy-side of the market, exercised by bidding up the prices to drive out marginal bidding. Neither predatory pricing or predatory buying is commonly a viable strategy, and the methods of both employ actions that are the essence of competition. Additionally, failed attempts at predatory pricing and predatory bidding can benefit consumers, justifying a narrow rule. Predatory bidding presents less of a threat of consumer harm. In short, monopolistic and monopsonistic practices are similar enough, both methodically and practically, that the Court deems is appropriate to apply the same test to both.