Weyerhaeuser and the Search for Antitrust’s Holy Grail

Cite this Article
Thom Lambert, Weyerhaeuser and the Search for Antitrust’s Holy Grail, Truth on the Market (October 03, 2007), https://truthonthemarket.com/2007/10/03/weyerhaeuser-and-the-search-for-antitrusts-holy-grail/

I’ve just posted my latest antitrust article, Weyerhaeuser and the Search for Antitrust’s Holy Grail, to SSRN. Here’s the abstract:

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.

I previously posted on the first part of the piece — the descriptive part arguing that Weyerhaeuser (1) implicitly rejects the raising rivals’ costs, consumer welfare balancing, and no economic sense tests, and (2) implicitly endorses the equally efficient rival approach. Having chatted offline with Josh about this section of the paper, I think the first assertion (the implicit rejection claim) is stronger than the second (the implicit endorsement claim).

Weyerhaeuser is clearly inconsistent with any of the three generalized definitions I claim the Court rejected. Under any of them, the jury verdict in favor of plaintiff Ross-Simmons should have been upheld, and it wasn’t. Thus, the Court indicated — albeit implicitly — that none of those three tests constitutes a generally applicable definition of exclusionary conduct.

It may be pushing things, though, to say that Weyerhaeuser endorses a generally applicable approach that equates exclusionary conduct with acts that could exclude an equally efficient rival. While the holding and reasoning of the case are certainly consistent with the equally efficient rival test, they’re also consistent with an approach that eschews a generalized test in favor of different standards that apply in different contexts. (Marina Lao has advocated that sort of “non-universal” approach.)

Unfortunately, I didn’t get Josh’s helpful comments until the paper was pretty far along in the production phase, so I couldn’t tweak it to reflect his valid criticism. Nonetheless, I like 95% of the paper. Close enough for government work. (I am a government employee, after all!)