Background on: Weyerhaeuser Co. v. Ross-Simmons Lumber Co., Inc.

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Feb 14, 2007

Issue: At issue in this case was whether the test applied for analyzing predatory pricing claims, first articulated by the U.S. Supreme Court in Brooke Group, Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993), should also be applied to claims of predatory bidding.

Factual and Procedural Background: The respondent, Ross-Simmons Lumber Co. (Ross-Simmons), brought suit against Weyerhaeuser Company (Weyerhaeuser) in the United States District Court for the District of Oregon for monopolization and attempted monopolization under  2 of the Sherman Antitrust Act, 15 U.S.C. 2. Ross-Simmons alleged that Weyerhaeuser had, essentially, driven Ross-Simmons out of business through “predatory bidding.” Ross-Simmons alleged that by bidding up the price of a specific type of hardwood, Weyerhaeuser had artificially driven up prices to very high levels in order to push its competition out of business. In the course of the proceedings in the District Court, Weyerhaeuser moved first for summary judgment, and later for judgment as a matter of law, arguing that the allegations of Ross-Simmons did not meet the requirements of the Brooke Group test. In Brooke Group the Supreme Court had held that a plaintiff bringing a claim under  2 of the Sherman Act for predatory pricing must show (1) that “the prices complained of are below an appropriate measure of its rival’s costs, and (2) that the rival had “a dangerous probability, of recouping its investment in below-cost prices. 509 U.S. at 222-223. Ross-Simmons, in turn argued that it allegations need not meet the requirements of that test since the test was not appropriate for claims of predatory bidding. The District Court denied Weyerhaeuser’s motions. The jury subsequently found for Ross-Simmons, and returned a verdict of $26 million against Weyerhaeuser.

On Appeal: Weyerhaeuser appealed the verdict to the United States Court of Appeals for the Ninth Circuit. The Ninth Circuit affirmed District Court jury’s verdict. The Ninth Circuit drew a distinction between “sell-side predatory pricing and “buy-side predatory bidding, and held, contrary to Weyerhaeuser’s assertions, that the Brooke Group test was inapplicable to claims of predatory bidding. Weyerhaeuser petitioned for certiorari in U.S. Supreme Court, challenging the decision of the Ninth Circuit.

Decision: On February 20, 2007 the Supreme Court issued its opinion, and vacated the judgment of the Ninth Circuit. Justice Thomas, writing for a unanimous court, held that the Brooke Group test is, indeed, the appropriate test for analyzing claims of predatory bidding. The Court further held that Ross-Simmons had not satisfied that standard. As such, the claims of Ross-Simmons could not be maintained. The judgment below was vacated and remanded for further proceeding consistent with the Court’s decision.

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