Weyerhaeuser and the Search for Antitrust's Holy Grail
Cato Supreme Court Review, p. 277, 2006-2007
39 Pages Posted: 4 Oct 2007
A general definition of exclusionary conduct has become a sort of Holy Grail for antitrust scholars. At present, four proposed definitions appear most promising: (1) conduct that could exclude an equally efficient rival; (2) conduct that raises rivals' costs unjustifiably; (3) conduct that, on balance, impairs consumer welfare by creating market power without providing countervailing consumer benefits; and (4) conduct that makes no economic sense but for its exclusionary effect on rivals.
In Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 127 S. Ct. 1069 (2007), the U.S. Supreme Court implicitly weighed in on this debate over a generalized exclusionary conduct test. The issue before the Weyerhaeuser Court - should the legal standards governing predatory pricing similarly apply in predatory bidding cases? - appears on first glance to be rather narrow. In resolving that seemingly narrow issue, though, the Court seems implicitly to have rejected the second, third, and fourth definitions of exclusionary conduct (i.e., the raising rivals' costs approach, the consumer welfare effects test, and the no economic sense test). The Court's holding and reasoning are consistent with only the equally efficient rival approach.
This article asserts two primary claims, one descriptive and one normative. As a descriptive matter, the article asserts that the Supreme Court has implicitly rejected all the proposed exclusionary conduct definitions except for the equally efficient rival approach. As a normative matter, the article argues that this is a salutary development - that the equally efficient rival test, while somewhat underdeterrent, is the best of the proposed generalized definitions.
Keywords: exclusionary conduct, exclusion, Weyerhaeuser, predation, predatory bidding, predatory pricing, antitrust, bundled discounts, loyalty discounts, loyalty rebates, Sherman Act, monopolization
JEL Classification: D42, K20, K21, L11, L12, L40, L41, L42
Suggested Citation: Suggested Citation