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David Olsky, Feb 22, 2007
The general legal standard for determining whether unilateral conduct violates Section 2 of the Sherman Act is murky, to say the least. Many courts have employed a “totality of the circumstances” approach, leaving it to the jury to decide whether, on balance, a particular business practice is anticompetitive, pro-competitive or otherwise has a valid business justification, while providing minimum guidance on how to resolve that issue. In Brooke Group v. Brown & Williamson Tobacco Corp., the U.S. Supreme Court somewhat ameliorated this confusion by adopting a bright-line test for claims alleging one particular type of anticompetitive unilateral conduct “predatory pricing.” The Court held that predatory pricing claims turn on proof that a firm
(1) lowered prices below some measure of its costs, and
(2) had a dangerous probability of recouping its losses upon its rival’s exit from the market.
The question for lower courts after Brooke Group was whether and to what extent its two-part test for predatory pricing should be applied to other forms of ostensibly anticompetitive unilateral conduct, such as bundled pricing or exclusive dealing. On February 20, 2007, the Supreme Court took an incremental step towards clarifying the reach of Brooke Group in Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co. In Weyerhaeuser, the Court applied the Brooke Group test to claims that a firm with