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The Law of Anticompetitive Price Squeeze Claims

M. Brian McMahon
© 2009

I. Introduction.

In Pacific Bell Telephone v. Linkline Communications, Inc. (Linkline),[1] the United States Supreme Court held that a defendant that competed in two levels in the market was not liable under Section 2 of the Sherman Act for engaging in a "price squeeze." In so holding, the Court primarily relied on two of its previous decisions. In Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko (Trinko),[2] the Court held that a firm with no antitrust duty to deal with its competitors at all does not have an antitrust duty to provide the competitors with a "sufficient" level of service.[3] In Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.,[4] the Court held that even though a competitor set its prices below its costs, its conduct did not give rise to antitrust liability because the plaintiff had not established that there was a dangerous probability that the competitor would be able to recoup the profits it lost from its below cost pricing.[5] These three decisions together with Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co.,[6] raise serious questions as to whether a predatory pricing scheme, a price squeeze and a refusal to aid competitors can give rise to antitrust liability in the future. This paper discusses the future of these traditional antirust theories of liability and their implications in related areas of antitrust law.

II. The Predatory Pricing Decision: Brooke Group.

In Brooke Group, the Court held that the defendant in an oligopolistic market[7] did not engage in predatory pricing in violation of the Robinson-Patman Act, even though its prices were below its average total cost, and at times, below its average variable cost. The court reasoned that the plaintiff had not submitted evidence at trial sufficient to prove that the defendant's alleged practice was likely to result in sustained supra-competitive pricing so as to permit the defendant to recoup its below-cost prices, and that, without proof of such recoupment, the defendant was entitled to judgment as a matter of law.

The plaintiff, Liggett, introduced generic, that is, non-branded cigarettes, into the cigarette market. Liggett's generic cigarettes were cheaper than branded cigarettes. Defendant Brown and Williamson (B&W), a manufacturer of branded cigarettes, responded by introducing its own generic cigarettes at discounted prices. The suggested retail price of B&W's generics was the same as Liggett's, but its volume discounts in the form of rebates to wholesalers were larger. Liggett responded by increasing its wholesale rebates, and a price war followed at the wholesale level. Liggett alleged, and B&W did not dispute, that during the price war B&W dropped its prices below its average total cost for a prolonged period of time, and at times below even its average variable cost.

Liggett filed suit contending that B&W's pricing behavior amounted to price discrimination that had a reasonable possibility of injuring competition in violation of Section 2A of the Clayton Act, as amended by the Robinson-Patman Act.[8] That section provides that it is unlawful to discriminate in price between different purchasers of commodities of like grade and quality where the effect of discrimination may be to substantially lessen competition or tend to create a monopoly. The essence of Liggett's claim was that B&W "cut prices on generic cigarettes below cost and offered discriminatory volume rebates to wholesalers in order to force Liggett to raise its own generic cigarette prices and introduce higher oligopoly pricing in the economy segment."[9] Liggett contended that B&W's rebates to wholesalers threatened substantial competitive injury by furthering a predatory pricing scheme designed to purge competition from the generic segment of the cigarette market.[10]

The jury returned a verdict in favor of Liggett, finding on the special verdict form that B&W had "engaged in price discrimination that had a reasonable possibility of injuring competition in the domestic cigarette market as a whole" and awarded $49.6 million in damages.[11] The district court, however, ruled that B&W was entitled to judgment as a matter of law.[12] One of the court's grounds was that Liggett had not shown that the growth rate of generics had slowed. Thus Liggett had not shown any injury to competition, unless there had been a tacit coordination of prices by cigarette manufacturers to later raise prices and recoup losses stemming from the alleged underpricing. But, according to the district court, there was no evidence of such price coordination. Thus B&W had no reasonable possibility of limiting the growth of generics by pricing below its costs.[13]

The Fourth Circuit affirmed, reasoning that it was economically irrational to rely on an oligopoly to assure recoupment of losses from a predatory pricing scheme. The court's reasoning was tantamount to a holding that no plaintiff could ever prove a predatory pricing scheme in an oligopolistic setting.[14]

Liggett sought review in the Supreme Court. In its decision in favor of B&W, two related principles guided the Supreme Court's analysis. First, "'predatory pricing schemes are rarely tried, and even more rarely successful' and the costs of an erroneous finding of liability are high."[15] The second guiding principle is that low prices are good for consumers: "[l]ow prices benefit consumers regardless of how those prices are set...."[16]

The Court first noted that "primary-line competitive injury under the Robinson-Patman Act is of the same general character as the injury inflicted by predatory pricing schemes actionable under § 2 of the Sherman Act."[17] In both illegal practices, a business has priced its products for the purpose of eliminating or retarding competition and thereby controlling prices.[18] The only difference between the Robinson-Patman Act and §2 of the Sherman Act with regard to this issue is that §2 of the Sherman Act condemns predatory pricing only when it poses a dangerous probability of actual monopolization; whereas the Robinson-Patman Act requires only that there is a dangerous possibility of substantial injury to competition.[19] The Court held that, whether the claim alleges predatory pricing under Section 2 of the Sherman Act or primary-line price discrimination under the Robinson-Patman Act, two prerequisites must be established:

First, a plaintiff seeking to establish competitive injury resulting from a rival's low prices must prove that the prices complained of are below an appropriate measure of its rival's costs.[20]

***

The second prerequisite to holding a competitor liable under the antitrust laws for charging low prices is a demonstration that the competitor had a reasonable prospect [under the Robinson-Patman Act], or, under § 2 of the Sherman Act, a dangerous probability of recouping its investment in below-cost prices.[21]

The Court proceeded to review the evidence adduced at trial to determine whether Liggett had established the two prerequisites. Because Liggett had won at trial, the Court stated that it was obliged to view the evidence in the light most favorable to the plaintiff.[22] Viewed in that light, the Court recognized that cigarette manufacturing had long been one of the most concentrated industries in America[23]; that the cigarette industry had long been one of America's most profitable, because for years there had been no price competition among the firms[24]; that the price levels for branded cigarettes had been historically supra-competitive[25]; and that a reasonable jury could conclude that B&W envisioned or intended an anticompetitive course of events.[26] Despite these acknowledgments, the Court ruled that B&W was entitled to judgment as matter of law.

The first prerequisite requires that the plaintiff demonstrate that the defendant's prices were below the defendant's costs. It is irrelevant that the defendant's price is below some general market level or even below its competitors' costs. The Court was concerned that to interpret the antitrust laws so as to protect competitors from the loss of profits due to price competition would have the effect of rendering illegal any decision by a firm to cut prices in order to increase market share: "[l]ow prices benefit consumers regardless of how those prices are set, and so long as they are above predatory levels, they do not threaten competition."[27]

Liggett did demonstrate that B&W's prices were below its costs: "a reasonable jury could conclude that for a period of approximately 18 months, Brown & Williamson's prices on its generic cigarettes were below its costs...and that this below-cost pricing imposed losses on Liggett that Liggett was unwilling to sustain...."[28]

The second prerequisite requires that the plaintiff establish that there is a likelihood that the predatory scheme alleged would cause a rise in prices above a competitive level sufficient to compensate the defendant for the amounts of its predation, including the time value of the money invested in it.[29] "In order to recoup their losses, [predators] must obtain enough market power to set higher than competitive prices and then must sustain those prices long enough to earn in excess profits what they earlier gave up in below-cost prices."[30] The plaintiff's case fails if the plaintiff does not show that the predatory pricing scheme would likely result in sustained supra-competitive pricing.[31]

The Court noted the difficulty Liggett faced in proving the second prerequisite. Predatory pricing even for single firms is implausible;[32] predatory pricing by conspirators is "incalculably more difficult to execute;"[33] and a predatory pricing scheme that relies on conscious parallelism of an oligopoly to recoup losses "must be considered the least likely means of recouping predatory losses."[34] Here, because there was no evidence of any conspiracy among B&W's competitors, tacit coordination of pricing in an oligopolistic setting was the only possible means by which B&W could possibility recoup its below-cost prices.

The court held that B&W was entitled to judgment as a matter of law because Liggett did not show that B&W would likely recoup its below-cost pricing by achieving supra-competitive pricing. In the Court's view, because the market was characterized by a high degree of concentration and a history of oligopolistic pricing, competitors could just as readily have interpreted B&W's below-cost pricing as an attempt to capture market share and not as an effort to force an industry price increase.[35] Moreover, the evidence suggested to the Court that the price increases that followed defendant's below-cost pricing behavior may simply have been demand driven and not the result of collusion.

It is notable that the Court dismissed Liggett's evidence of supra-competitive pricing as irrelevant, because supra-competitive pricing may be the result of "tacit collusion, sometimes called oligopolistic price coordination or conscious parallelism, [which] describes the process not in itself unlawful by which firms in a concentrated market might share monopoly power, setting their prices at a profit-maximizing super-competitive level by recognizing their shared economic interest and their inter-dependence with respect to price and output decisions."[36] Thus proof of supra-competitive pricing in an oligopolistic setting is a necessary but not sufficient condition for establishing the second prerequisite. But Liggett's evidence failed to show even the likelihood of supra-competitive pricing.[37]

III. The Predatory Buying Decision: Weyerhaeuser

In Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., Inc, the Court held that the prerequisites for proof of predatory pricing apply with only slight modification to proof of predatory buying. A buyer of logs filed an antitrust suit against Weyerhaeuser alleging that Weyerhaeuser drove it out of business by bidding up input costs to artificial levels. The plaintiff's theory was that Weyerhaeuser's plan was to bid up the cost of logs until plaintiff was put out of business and then, when competition ceased, to lower the price of logs and recoup its losses caused by its artificially high bids for logs.

After trial, the jury awarded antitrust damages to the plaintiff. The Ninth Circuit affirmed, refusing to apply the Brooke Group requirements to predatory buying on the ground that "buy-side predatory bidding" and "sell-side predatory pricing" are materially different in that predatory bidding does not necessarily benefit consumers or stimulate competition in the way that predatory pricing does.[38]

Unlike Brooke Group, which involved an alleged predatory scheme in the context of an oligopoly or Matsushita, which involved an alleged predatory scheme by conspirators, Weyerhaeuser involved an alleged predatory scheme by one defendant with alleged market power. That difference did not help the plaintiff in Weyerhaeuser. The Supreme Court in Weyerhaeuser reiterated the essential features of the Brooke Group decision. Weyerhaeuser reaffirmed the two prerequisites for predatory pricing.[39] As for the first prerequisite--prices below an appropriate measure of its rivals' costs--, the Court again rejected prices above costs as a standard because prices above cost either reflects the lower costs of the alleged predator and so represents competition or "is beyond the practical ability of a judicial tribunal to control."[40] The Weyerhaeuser Court reminded again that allowing recovery of above-cost price cutting could "'chill legitimate price cutting' which directly benefits consumers" and "[l]ow prices benefit consumers regardless of how those prices are set, and as long so they are above predatory levels, they do not threaten competition."[41]

As for the second of the Brooke Group prerequisites --the competitor had a dangerous probability of recouping its investment in below-cost prices --the Court restated the rationale that without a dangerous probability of recoupment, it is unlikely that a firm would engage in predatory pricing.[42] The Court emphasized that the costs of erroneous findings of predatory pricing were high because the mechanism of predatory pricing has the same result as highly competive companies, i.e., low prices.[43]

Predatory bidding involves the exercise of market power on the buyer's side. Market power on the buyer's side is called monopsony power in contrast to monopoly power on the seller's side. "Predatory-pricing and predatory-bidding claims are analytically similar."[44] As with predatory-pricing schemes, predatory-bidding "schemes are rarely tried, and even more rarely successful."[45] The reason is the need to incur certain short term losses for the chance of supra-competitive profits in the future.[46] Moreover, there are "myriad legitimate reasons...why a buyer might bid up input prices."[47]

The Court modified slightly the Brooke Group prerequisites when applied to predatory bidding. First, "the predator's bidding on the buy side must have caused the cost of the relevant output to rise above the revenues generated in the sale of those outputs."[48] Second, "plaintiff also must prove that the defendant has a dangerous probability of recouping the losses incurred in bidding up input prices through the exercise of monopsony power."[49] Because the plaintiff conceded that it had not satisfied the Brooke Group standard, the Court held that the plaintiff's predatory-bidding theory of liability could not support the jury's verdict.[50] The Weyerhaeuser decision is fully consistent with Brooke Group.

IV. The Duty to Deal with Competitors Decision: Trinko.

The interplay of monopolization and regulatory oversight was at issue in Trinko. The case holds that a regional telephone company did not engage in illegal monopolizing conduct by breaching its statutory obligations under the Federal Telecommunications Act of 1996 (the "1996 Act") to share its network system and equipment with competitors on nondiscriminatory terms.

The case originated in complaints brought by AT&T and other local exchange carriers before the New York Public Service Commission ("PSC") and the Federal Communications Commission ("FCC"). The complaints alleged that Verizon, the incumbent local exchange carrier in New York State, failed to fulfill its obligations under the 1996 Act to provide access to Verizon's support systems so that they could compete with Verizon for local service. The investigations that followed by the PSC and the FCC resulted in a series of PSC orders and an FCC consent decree. Trinko, one of AT&T's customers, then brought a claim under § 2 of the Sherman Act alleging that Verizon's failure to fulfill its obligations under the 1996 Act was part of an anticompetitive scheme to discourage customers from becoming clients of Verizon's rivals. The complaint alleged that Verizon's conduct constituted an illegal refusal to deal with its rivals. The Supreme Court held that the complaint should be dismissed in its entirety.

The Court recognized that "[t]he mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free market system."[51] Thus compelling monopolists to share is in tension with one of the underlying purposes of the antitrust law in that it may lessen the monopolist's incentives to invest in economically beneficial facilities.[52]

The Court was aware that under certain circumstances a refusal by a monopolist to cooperate with rivals can constitute anticompetitive conduct and thereby violate § 2 of the Sherman Act. But the Court said it is "very cautious in recognizing such exceptions, because of the uncertain virtue of forced sharing and the difficulty of identifying and remedying anticompetitive conduct by a single firm."[53]

The Court noted that it had held that a monopolist had a duty to cooperate with its rivals in Aspen Skiing Co. v. Aspen Highland Skiing Corp., 472 U.S. 585 (1985). But the Court described Aspen Skiing as "at or near the outer boundary of § 2 liability."[54] Aspen Skiing, according to the Court, involved a unique set of facts in which a monopolist had purposely ceased participation in a cooperative venture it had operated for years with its smaller rival and had even refused to allow the competitor access at full retail prices. This behavior showed "a willingness to forsake short-term profits to achieve an anticompetitive end" and "a distinctly anticompetitive bent."[55]

The Trinko Court distinguished AspenSkiing on the grounds that Verizon did not discontinue participation in a pre-existing cooperative venture with its rival. In addition, Verizon did not reveal "a willingness to forsake short-term profits to achieve an anticompetitive end."[56] Instead, Verizon simply defaulted on its statutory support obligations created by the 1996 Act, which statutory obligations were subject to extensive administrative oversight and regulation. Trinko involved no similar assertion that the defendant had "engaged in a course of dealing with its rivals, or would ever have done so absent statutory compulsion," or that it had turned down an opportunity to "sell at its own retail price."[57]

So the Trinko Court declined to add to "the few existing exceptions from the proposition that there is no duty to aid competitors."[58] The Court rejected also the claim that the essential facilities doctrine applied, stating "[w]e have never recognized such a doctrine."[59]

The Court placed strong reliance on the fact that the conduct in question was subject to regulation designed to deter and remedy anticompetitive harm. "Where such a structure exists, the additional benefit to competition provided by antitrust enforcement will tend to be small, and it will be less plausible that the antitrust laws contemplate such additional scrutiny."[60] The Court was satisfied that the FCC and the state agency had proved to be an "effective steward of the antitrust function."[61]

It is significant that the Court signaled its strong ambivalence to antitrust law generally by referring to antitrust's "sometimes considerable disadvantages."[62] The Court concluded with a litany of the costs of antitrust intervention.

Against the slight benefits of antitrust intervention here, we must weigh a realistic assessment of its costs. Under the best of circumstances, applying the requirements of §2 "can be difficult" because "the means of illicit exclusion, like the means of legitimate competition, are myriad."[63]

The cost of false positives counsels against an undue expansion of § 2 liability. One false-positive risk is that an incumbent LEC's failure to provide a service with sufficient alacrity might have nothing to do with exclusion. Allegations of violations of § 251(c )(3) duties are difficult for antitrust courts to evaluate, not only because they are highly technical, but also because they are likely to be extremely numerous...."[64]

Judicial oversight under the Sherman Act would seem destined to distort investment and lead to a new layer of interminable litigation, atop the variety of litigation routes already available to and actively pursued by competitive LECs."[65]

Even if the problem of false positives did not exist, conduct consisting of anticompetitive violations of § 251 may be, as we have concluded with respect to above-cost predatory pricing schemes, "beyond the practical ability of a judicial tribunal to control."[66]

We think that Professor Areeda got it exactly right: "No court should impose a duty to deal that it cannot explain or adequately and reasonably supervise. The problem should be deemed irremedia[ble] by antitrust law when compulsory access requires the court to assume the day-to-day controls characteristic of a regulatory agency."[67]

Indeed, in the Court's view, the

1996 Act is, in an important respect, much more ambitious than the antitrust laws. It attempts "to eliminate the monopolies enjoyed by the inheritors of AT&T's local franchises." ... Section 2 of the Sherman Act, by contrast, seeks merely to prevent unlawful monopolization. It would be a serious mistake to conflate the two goals. The Sherman Act is indeed the "Magna Charta of free enterprise...."[68]

All but the first of the "costs" of antitrust intervention enumerated by the Court are related to the fact that there already existed a layer of a regulatory framework. In this regard, the Court reflected the sentiments of Justice Breyer, while Chief Judge of the First Circuit, in Town of Concord v. Boston Edison Co. (Concord), 915 F.2d 17 (1st Cir. 1990), cert. denied, 111 S. Ct. 1337 (1991). In rejecting a price squeeze claim in the regulated electrical industry, the court stated:

[T]he relevant antitrust considerations differs significantly, in degree and kind, when a price squeeze occurs in a full regulated as opposed to an unregulated industry. Indeed, these considerations, which are closely balanced in the ordinary price squeeze, change so significantly when the squeeze takes place in a fully regulated industry that, in our opinion, the legal consequences of the squeeze change as well. That is to say, a price squeeze in a fully regulated industry such as electricity will not normally constitute 'exclusionary conduct' under Sherman Act § 2.[69]

V. The Anticompetitive Price Squeeze Decision: Linkline.

In Pacific Bell Telephone v. Linkline Communications, Plaintiffs, four independent internet service providers, alleged that AT&T squeezed their profit margins by setting a high wholesale price for DSL transport and a low retail price for DSL internet service.[70] AT&T owns much of the facilities needed to provide DSL service in California and controls the "last mile," the lines connecting buildings to the telephone network. As a condition imposed by the FCC for a recent merger, AT&T is obligated to provide wholesale DSL transport service to independent service providers at a price no greater than the price of AT&T's retail DSL service.[71] The plaintiffs both compete with AT&T in the retail market and lease transport service from AT&T. AT&T participates in both the wholesale and retail levels.

A necessary condition for a price squeeze is that a company operates at two levels of an industry. A price squeeze also requires that the customers of the company operating on two levels are also its competitors. A price squeeze occurs when a company operating at two levels of an industry sets its prices or rates at the upstream level so high that its customers cannot compete with it in the downstream market.

In Linkline, the plaintiffs alleged that AT&T's price squeeze excluded and unreasonably impeded competition and allowed AT&T to preserve its monopoly control of DSL access to the internet. In the district court, AT&T moved for dismissal on the pleadings contending that the Supreme Court's decision in Trinko barred the price squeeze claim. The district court denied the motion to dismiss the price squeeze claims, even while recognizing that AT&T had no duty to deal with the plaintiffs at all. The court denied the motion on the ground that Trinko does not involve price squeeze claims. The court then certified its ruling for interlocutory review.

The Ninth Circuit, in a two to one decision, affirmed the district court's denial of the motion to dismiss on the grounds that Trinko did not involve a price squeeze theory and that the price squeeze theory as a theory of antitrust liability existed prior to Trinko. The dissent contended that Trinko insulated from antitrust liability the setting of the upstream wholesale price and the allegations of the complaint did not satisfy the requirements of Brooke Group with respect to predatory pricing.

When the Supreme Court accepted certiorari, it was a foregone conclusion to the plaintiffs that the Ninth Circuit decision would be reversed.[72] The Supreme Court started its analysis by noting that "[a]s a general rule, businesses are free to choose the parties with whom they will deal, as well as the prices, terms and conditions of that dealing."[73] The Court also noted that there were "rare instances" in which a dominant firm may incur antitrust liability for purely unilateral conduct. Brooke Group, for example, recognized that a dominant firm may not charge below-cost-prices that drive competitors out of the market and allow monopolists to recoup its costs later. The Court acknowledged also that there are "limited circumstances" in which a firm can be liable for its unilateral refusal to deal with its rivals, citing Aspen Skiing. The crux of the problem the plaintiffs faced here is that the plaintiff's complained about retail prices where there was no predatory pricing and about the terms of AT&T's dealing with them where there was no duty to deal.[74]

The Court held that Trinko forecloses plaintiffs' challenges to AT&T's wholesale prices. The Court described Trinko for the proposition that "if a firm has no antitrust duty to deal with its competitors at wholesale, it certainly has no duty to deal under terms and conditions that the rivals find commercially advantageous."[75] Moreover, for antitrust purposes, there is no reason to distinguish between price and non-price components of a transaction.[76] Thus there is no real difference between the insufficient assistance claims in Trinko and price squeeze claims alleged here.

The Court held that Linkline's claims about AT&T's retail prices were also defective because the complaint did not allege that AT&T's prices met either of the Brooke Group requirements: (1) the prices complained of were below an appropriate measure of its rivals' costs; and (2) there is a dangerous probability that the defendant will be able to recoup its investment in below-cost prices.[77]

The Court described as "meritless" plaintiffs' claims on the wholesale and retail levels.[78] The Court accordingly concluded: "If there is no duty to deal at the wholesale level and no predatory pricing at the retail level, then a firm is certainly not required to price both of these services in a manner that preserves its rival's profit margins."[79]

If the Court had gone no further, the Linkline decision would have been limited to a holding that a price squeeze claim must establish both predatory pricing on downstream sales and a duty to deal on the upstream sales. But the Court went much further. Having held that the complaint failed to state an antitrust price squeeze claim, the Court proceeded to raise "institutional concerns" that counseled against recognizing any price squeeze claim. The Court's concerns arose out of the classic statement of the price squeeze doctrine in United States v. Aluminum Co, 148 F.2d 416 (2d Cir. 1945) (Alcoa). Alcoa controlled the domestic production of America's aluminum ingot. Alcoa both sold manufactured aluminum sheet from the ingot it produced and sold aluminum ingot to manufacturers who turned the ingot into aluminum sheet. Alcoa operated on two levels in the aluminum market: ingot production and sheet production. The Alcoa Court held that a firm such as Alcoa engages in an illegal price squeeze in violation of §2 of the Sherman Act when (1) the firm has monopoly power at the first level of the market; (2) the wholesale price it charges at the first level to its competitors on the second level is "higher than a 'fair price'"; and (3) its price on the second level is so low that its competitors cannot make a "living profit."[80]

Without expressly saying so, the Court in Linkline was addressing its "institutional concerns" to the analysis of the price squeeze theory of liability as articulated in Alcoa. The most pressing problem with the price squeeze doctrine is how a judge or jury is to determine a "fair" price.[81] The difficulties, if not the impossibility, of determining a "fair price" were set out in Concord, and quoted by the Linkline Court.[82] The criticism raised against the difficulties of determining a fair price was consistent with the Court's previous rejection of a fairness standard in antitrust jurisprudence. In Brooke Group, the Court stated "the federal antitrust laws....do not create a federal law of unfair competition."[83] Finally, the Linkline Court stated that there is no independent competitive harm caused by a price squeeze beyond those that result from a duty to deal at the wholesale level and predatory pricing at the retail level.[84]

It is significant in the Court's analysis that it twice refers to price squeeze as a "new" theory of antitrust liability[85], even though the Court (1) refers to Alcoa, which clearly articulated a price squeeze claim [86]; (2) acknowledged that the district court in Linkline noted that price squeeze claims have been recognized by several circuits[87]; and (3) cited Concord with approval, a decision by Justice Breyer, then Judge Breyer, which itself cited to several decisions holding that a price squeeze violated Sherman Act § 2.[88] The Court concludes that there is no independent competitive harm caused by a price squeeze beyond that which would result from a duty to deal violation or a predatory pricing level.

VI. The Future of Antitrust Jurisprudence After Brooke Group, Trinko and Linkline.

The Supreme Court's criticisms of the plaintiffs' cases in Brooke Group, Weyerhaeuser, Trinko, and Linkline call into question the extent to which antitrust claims predicated on predatory pricing, duties to cooperate with rivals, and price squeezes can survive summary adjudication. Additionally, these decisions raise questions as to their implications for other theories of antitrust liability.

A. The Burdens Placed on Predatory Pricing Claims by Brooke Group.

None of the Supreme Court decisions expressly rule out the possibility of successful predatory pricing claims. In fact, the Brooke Group Court explicitly denied that plaintiffs could never establish a predatory pricing claim in an oligopolistic market.[89] Nonetheless, the statement in Matsushita that "predatory pricing schemes are rarely tried, and even more rarely successful" has been repeated in Brooke Group, Weyerhaeuser and Linkline. That statement conveys the Court's view that predatory pricing claims will be viewed by the courts with extreme skepticism and will likely be subject to summary adjudication. As one might expect, given the Supreme Court's "extreme skepticism of predatory pricing claims,"[90] it is not surprising that lower courts have affirmed and/or granted summary disposition against predatory pricing claims in a large number of decisions.[91]

The Court's skepticism of predatory pricing theories is not limited to situations involving oligopolistic markets. Although it is true that the Court in Brooke Group rejected the plaintiff's predatory pricing claim in part because the predatory pricing scheme alleged there relied on conscious parallelism of oligopolists,[92] Linkline involved a predatory pricing claim in a DSL market dominated by one company. The fact that an alleged predatory pricing scheme in Brooke Group took place in an oligopoly market was not essential to its analysis of predatory pricing. It is still true that however skeptical the Court is about predatory pricing claims in the context of a market dominated by a single firm, it is more skeptical of such claims in the context of a market involving an alleged conspiracy, and even more skeptical in an oligopoly or oligopsony market.

A difficulty that plaintiffs face in bringing predatory pricing claims, which is caused by the second of the Brooke Group prerequisites but not identified by the Court, is the statute of limitations. Plaintiffs must establish that the defendant has a "dangerous probability of recouping its investment in below-cost prices."[93] Even in a successful predatory pricing scheme, the time period between the below-cost pricing which harms the plaintiff and the recoupment of those losses by the predator is apt to take several years. The plaintiff will not be able to establish that the predator has a dangerous probability of recoupment until the defendant actually begins to recoup its losses and evidences the method by which it is recouping its losses. The plaintiff is thus subject to dismissal of even valid predatory pricing schemes, either because its proof of the second of the Brooke Group perquisites is speculative or because the statute of limitations has run.

In sum, predatory pricing claims are not explicitly precluded by Supreme Court decisions, but the requirements of proof required by the Court makes such claims extremely difficult, if not impossible, to prove.

B. The Application of Brooke Group to Bundled Discounts.

The requirements for proof of predatory pricing in a single-product case are clearly set forth in Brooke Group. But a conflict has arisen among courts with respect to how the Brooke Group principles are to be applied to bundled discounts.

Bundled discounts are described in Cascade Health Solutions v. PeaceHealth:

Bundling is the practice of offering, for a single price, two or more goods or services that could be sold separately. A bundled discount occurs when a firm sells a bundle of goods or services for a lower price than the seller charges for the goods or services purchased individually.[94]

Bundled discounts are pervasive; e.g., season tickets, fast food value meals, all-in-one home theater systems, to name but a few.[95] Bundled discounts "generally benefit buyers because the discounts allow the buyer to get more for less" and so they are generally procompetitive.[96] Nonetheless, "it is evident that bundled discounts, while potentially procompetitive by offering bargains to consumers, can also pose the threat of anticompetitive impact by excluding less diversified but more efficient producers." [97] The anticompetitive impact arises because it is possible "for a firm to use a bundled discount to exclude an equally or more efficient competitor and thereby reduce consumer welfare in the long run."[98] "For example, a competitor who sells only a single product in the bundle (and who produces that single product at a lower cost than the defendant) might not be able to match profitably the price created by the multi-product bundled discount."[99]

Courts agree that the single product analysis of predatory pricing in Brooke Group cannot be applied in toto to anticompetitive bundled discounts. They disagree, however, as to what test to use to distinguish bundled discounts that are procompetitive and thus lawful from bundled discounts that are anticompetitive and thus proscribed under § 2 of the Sherman Act.[100]

The Third Circuit test for an anticompetitive bundled discount is presented in Le Page's Inc. v. 3M.[101] There, LePage's, which manufactures transparent tape for the private label market, alleged that 3M used its monopoly over its Scotch tape brand to gain a competitive advantage in the private label tape market through the use of a multi-tiered, bundled rebate structure, which offered higher rebates when customers purchased products in a number of 3M's different product lines.[102] The jury decided in favor of LePage's Inc. on its § 2 claim. The district court granted 3M's motion for judgment as a matter of law on the § 2 claim. 3M argued on appeal that above cost pricing cannot give rise to an antitrust offense as a matter of law, citing Brooke Group, and that its conduct with respect to bundled discounts was legal because it never priced its transparent tape below its cost.[103] The Le Page's court rejected the application of Brooke Group's below cost requirement for two reasons. First, the defendant in Brooke Group was part of an oligopoly, whereas the defendant in the present case was "a monopolist with its unconstrained market power."[104] Second, Le Page's, unlike the plaintiff in Brooke Group, did not make a predatory pricing claim.[105] The court concluded in its rejection of the application of Brooke Group to the dispute:

Nothing in any of the Supreme Court's opinions in the decade since the Brooke Group decision suggested that the opinion overturned decades of Supreme Court precedent that evaluated a monopolist's liability under § 2 by examining its exclusionary, i.e., predatory, conduct.[106]

The district court in Ortho Diagnostic Systems, Inc. v. Abbott Laboratories, Inc. took a different approach.[107] In that case, Abbott alone manufactured all five of the commonly used test products used in screening blood supplies for the presence of viruses. Ortho manufactured only some of the test products. Ortho alleged that Abbott violated the antitrust laws by entering into a contract with the Council of Community Blood Centers ("CCBC") pursuant to which CCBC members were entitled to advantageous pricing if they purchased a package of four or five tests from Abbott.[108] Abbott moved for summary judgment on the ground that it did not sell any of its tests below its average variable cost and, under Brooke Group, was entitled to summary judgment.[109] The critical issue for the court was whether a firm that enjoys a monopoly on one or more products but which faces competition on others can price all of its products above average variable cost and yet still drive an equally efficient competitor out of the market.[110] The court answered that question affirmatively. The court recognized that pricing below average variable cost is the controlling standard in a single product case, following Brooke Group. But the court held that Brooke Group is not controlling with respect to bundled pricing, because that decision did not address packaged pricing.[111] Thus, the fact that the defendant priced all of the components of the bundled package at or above average variable cost is not alone fatal to the Section 2 claims. Relying on the principle that only price cutting that threatens equally or more efficient firms is condemned under Section 2, the court formulated the following test to determine whether a monopolist's bundled discount violates Section 2: the plaintiff "must allege and prove either that (a) the monopolist has priced below its average variable cost or (b) the plaintiff is at least as efficient a producer of the competitive product as the defendant, but that the defendant's pricing makes it unprofitable for the plaintiff to continue to produce."[112] Because Abbott priced its products above not only its own average variable costs but also above Ortho's costs, Abbott's bundled discounts did not violate Section 2.

A third test for an illegal bundled discount is presented in Cascade Health Solutions. The plaintiff, which operated one hospital, provided only primary and secondary acute care hospital services (e.g., setting a broken bone, performing a tonsillectomy). The defendant, which operated three hospitals, provided primary and secondary acute care hospital services as well as tertiary services, which includes more complex services (e.g., invasive cardiovascular surgery.) The plaintiff filed a complaint alleging, inter alia, that PeaceHealth, engaged in anticompetitive conduct by offering insurers bundled or packaged discounts on tertiary services if the insurers made PeaceHealth their sole preferred provider for all three types of services. The Ninth Circuit rejected the Le Page's test because it incorrectly dispensed with any requirement under Brooke Group to prove below cost pricing.[113] It rejected also the Ortho Diagnostic System's test. That test, according to the court, did not provide adequate guidance to sellers who wished to offer procompetitive bundled discounts because that standard looks to the costs of the actual plaintiff, which is unduly cumbersome for sellers to assess.[114] The court rejected also a simple test which looked only at whether the price of the bundle is, as a whole, below its cost to produce.

The test the court set out is a nuanced one:

To prove that a bundled discount was exclusionary or predatory for the purposes of a monopolization or attempted monopolization claim under § 2 of the Sherman Act, the plaintiff must establish that, after allocating the discount given by the defendant on the entire bundle of products to the competitive product or products, the defendant sold the competitive product or products below its average variable cost of producing them.[115]

The court rejected an additional element proposed by the defendant based on Brooke Group; viz., there is a dangerous probability that the defendant will recoup its investment in the bundled discounting program.[116] The court's rationale for rejecting that additional requirement was that, whereas single-product predatory pricing necessarily involves lost profits for the defendant, exclusionary bundling does not necessarily involve any lost profits for the bundled discounter.[117]

There are, thus, at least three tests for determining whether a defendant, which is a monopolist, has or has not violated § 2 in discounting a bundle of products. All three tests reject a straight forward application of the Brooke Group test. It remains to be seen how the courts will eventually reconcile the three tests so that manufacturers operating nationwide can safely offer bundled discounts without incurring antitrust liability.

C. The Future of Duty to Deal Claims.

Trinko is cited frequently for the proposition that a monopolist has no duty to cooperate with its competitors or sell its products to its competitors at a price favorable to the competitors. Nonetheless, Trinko does not stand for the broader principle that a monopolist has no restrictions on its activities. Trinko does not spell the end of Section 2 of the Sherman Act. Two decisions are illustrative of the limits of Trinko.

Nobody in Particular Presents, Inc. v. Clear Channel Communications, Inc., 311 F. Supp. 2d 1048 (D. Col. 2004) is a case in which the district court relied on the rationale of Trinko in rejecting part of a summary judgment motion against the plaintiffs' essential facilities claim. There, rock concert promoters sued Clear Channel, an owner of rock radio stations, and a concert promoter, claiming that Clear Channel violated the Sherman Act by conditioning the stations' grant of air time and free promotional assistance to the artists' selection of Clear Channel's promoter when giving live performances in the area. One of the bases of the promoters' claims was that Clear Channel had made improper use of an essential facility. The owner moved for summary judgment against, inter alia, an essential facility claim, citing Trinko. The critical issue for the court was whether the facts of the case were more akin to those of Trinko or those of Aspen Skiing. Relying on the analysis of the essential facilities doctrine in Trinko, the court concluded that the facts were more like those in Aspen Skiing and so denied Clear Channel's summary judgment motion as to the essential facility claim.

According to court, Trinko "in analyzing an essential facilities case, ...focused on the monopolistic intent of the defendant."[118] In Trinko, there was no evidence of monopolistic intent because Verizon was not required and, more importantly, did not give its competitors access to its local network before the 1996 Act.[119] Verizon had not engaged in a course of dealing with its rivals and so its prior conduct did not shed any light on whether its refusal to deal was prompted by competitive zeal (legal) or anticompetitive malice (illegal.)[120]

In Aspen Skiing, the plaintiff prevailed because the defendant (1) refused to provide a product that it had provided in the past, despite the fact that defendant would benefit financially from the transaction, and (2) chose to thereby sacrifice short-term gains in hopes of making long term monopolistic profits.[121] In contrast, the Trinko plaintiffs failed because there was no evidence of monopolistic intent since a course of dealing profitable to Verizon had never occurred; therefore, Verizon's conduct did not suggest a willingness to forsake short-term profits to achieve an anticompetitive end.[122] The court found for the plaintiffs because the facts in the instant case were like those in Aspen Skiing and not like those in Trinko. Clear Channel had provided advertising and concert promotional support in the past. But Clear Channel more recently refused to give this support and sacrificed short-term gains in hopes of destroying other promoters and reaping long-term monopolistic profits.

Another important reason for rejecting summary judgment was that the Trinko Court held that "an essential facility claim should be denied where a state or federal agency has effective power to compel sharing and regulate its scopes and terms."[123] There, the FCC was requiring that Verizon provide access to its facilities and so the plaintiffs could not bring an essential facilities claim. In the case against Clear Channel, there was no government agency compelling Clear Channel to allow access to its airways.[124]

In Stand Energy Corp. v. Columbia Gas Transmission Corp., 373 F. Supp. 2d 631 (S.D. W.Va. 2005), the court rejected the defendants' claim that Trinko precluded plaintiffs' refusal to deal claims, even though the complaint was based in part on alleged violations of FERC regulations. Plaintiffs, who transported and stored gas on the interstate pipeline systems of two pipeline companies, brought an action against the pipeline companies and certain other shippers alleging a conspiracy to deprive them of access to the transportation and storage services with the pipelines.[125] The alleged scheme allowed the defendants to monopolize the market to the detriment of the plaintiffs.

The court rejected the claim that Trinko precluded the plaintiffs' refusal to deal claims on two bases. The first basis was an obvious one. Trinko involved a monopolist and was brought under Section 2 of the Sherman Act, whereas the plaintiffs in the present case alleged a conspiracy under Section 1. The court accordingly distinguished Trinko on the basis that the alleged scheme fell within the "concerted action" cases noted by Footnote 3 of Trinko as presenting "greater competitive concerns."[126]

The more interesting basis for the court's basis for distinguishing Trinko was that Trinko enunciated the principle that the "existence of a regulatory structure designed to deter and remedy anticompetitive harm" reduces the need to apply antitrust law.[127] In Trinko, the court found that the regulatory scheme under the FCC was "more ambitious than the antitrust laws...to eliminate the monopolies."[128] In contrast, the regulatory scheme under FERC did not involve "the same level of regulatory overlay and unique market found in Trinko."[129] The court found that the fact that the FERC regulatory scheme did not take into account antitrust considerations made the facts more like those in Otter Tail Power, Co. v. United States,[130] than those in Trinko. The Stand Energy court noted that in Otter Tail, the court found the antitrust laws applicable despite the authority the Federal Power Commission had over the electrical industry.[131] What was determinative for the Otter Tail court was the fact that the regulatory scheme under the Federal Power Commission did not take into account antitrust considerations.[132] Accordingly, based on the reasoning of Otter Tail, the Stand Energy court rejected the defendants' objections to the plaintiffs' refusal to deal claims.

Despite the courts' holdings in Nobody in Particular Presents and Stand Energy, the Court's admonition in Trinko that the holding of Aspen Skiing is "at or near the outer boundary of § 2 liability,"[133] together with the Court's failure to refer to any decision providing a basis of a duty to deal except for Aspen Skiing, most likely means that for any Sherman § 2 claim to survive summary adjudication, the claim must closely adhere to the Aspen Skiing fact pattern.

D. The Future of Price Squeeze Claims.

The Linkline court cited with approval the First Circuit's decision in Concord rejecting a price squeeze claim in the context of electricity prices regulated by an agency.[134] In Concord, Breyer, then Chief Judge of the First Circuit, held that a price squeeze did not violate § 2 of the Sherman Act when electricity prices on the wholesale and retail levels were regulated. Even where the price squeeze is applied by a monopolist in an unregulated industry, the antitrust harms and benefits are in "close balance."[135] But full price regulation of the sort present in that case "alters the calculus of antitrust harms and benefits."[136] In a fully regulated industry, a price squeeze will not normally violate § 2 of the Sherman Act.[137]

Linkline goes far beyond Concord in rejecting the price squeeze claim asserted there. The Linkline Court's criticism of a price squeeze as a "new theory" and its reduction of a price squeeze claim to a combination of a duty to deal on the wholesale level and a predatory pricing claim on the retail level strongly suggests that a price squeeze as a separate antitrust theory of liability does not exist anymore, either for regulated or unregulated industries. The Court rejected plaintiffs' price squeeze claim not only because plaintiffs failed to establish the requirements of both a predatory pricing claim and a duty to deal claim, but also because of "institutional concerns" about price squeeze claims generally.[138]

The Court feared that price squeeze claims would require courts to police both wholesale and retail markets at the same time and courts would be asked to aim at a moving target, because "it is the interaction of the two prices that may result in a squeeze."[139] A second reason to reject price squeeze claims generally was the need for the courts to establish a "fair" or "adequate" margin between the wholesale and retail prices.[140] The Court effectively ruled that there is no acceptable standard for determining a fair or adequate margin.

A price squeeze basis for antitrust liability is analytically superfluous under Linkline's analysis. Linkline requires proof of predatory pricing. If a plaintiff were to establish that the elements of predatory pricing, it would have no need to bring an additional claim for a price squeeze

Linkline clearly spells the end of any price squeeze theory of antitrust liability. The Linkline's criticism of determining fair price together with its dismissive comments about a price squeeze theory as a "new theory" strongly suggests that no price squeeze theory of liability can be successfully brought in any federal antitrust case.

E. Extensions of the Linkline Holding.

Just as Linkline extended the rationales of Brooke Group and Trinko to cover price squeeze claims, extensions of the Linkline rationale should be expected. Already this can be seen in John Doe 1 v. Abbott Laboratories.[141] There the court upheld the dismissal of a Sherman Act § 2 monopolization and attempted monopolization claims based on the rationale of Linkline, even though the plaintiffs did not allege a price squeeze. Instead of a price squeeze claim, the plaintiff's theory involved monopoly leveraging through pricing conduct in two markets.[142] Abbot Laboratories makes a drug, Norvir, which boosts the effectiveness of protease inhibitors that are used to fight HIV. Abbott also sells a drug Kaletra, which combines Norvir and a protease inhibitor compound lopinavir. Drug companies Bristol Meyers-Squibb and GlaxoSmithKline also make inhibitors but do not make a booster like Norvir. These companies were given permission from the FDA to promote Norvir as a booster to be taken with their respective inhibitors. Once the FDA gave its permission, Abbott increased the price of Norvir from $1.71 to $8.57 per 100mg, but did not increase the price of Kaletra. The effect was to raise the cost of boosted protease inhibitors provided by Abbott's competitors, while maintaining a lower price for Abbott's boosted protease inhibitor.[143] Plaintiffs, consisting in a class of HIV patients and their medical plans that purchase Norvir, alleged that Abbott leveraged its Norvir monopoly in an attempt to monopolize the boosted market for Kaletra. Abbot moved for dismissal and summary judgment and the district court certified issues for appeal relating to Abbott's motions. The Ninth Circuit ruled that Linkline controlled the outcome.[144] The court reasoned that Linkline reiterated the rule expressed in Trinko that the mere possession of monopoly power and charging monopoly prices is not illegal under § 2. The court noted that Linkline followed Trinko in holding that a monopolist has no duty to deal with its competitors and thus no duty to deal under terms and conditions that the competitors find commercially advantageous, including no duty to sell its products to competitors at prices the competitors desire.[145] Similarly, the court noted that Linkline cited Brooke Group for the proposition that a price-squeeze claim should not be recognized where the defendant's price is above its cost.[146] Applying Linkline's analysis, the court concluded that the plaintiffs' claims against Abbott fell short. Plaintiffs did not allege that there was a refusal to deal at the booster level-Abbott did sell Norvir--, nor that Abbott sold Kaletra at a price below cost at the boosted level.

The court acknowledged that plaintiffs' claims against Abbott were for monopoly leveraging and not price squeezing. But stated that "[w]e understand the difference, but it is insubstantial."[147] Abbott's conduct, the court observed, was the functional equivalent of a price squeeze.[148] The reason that Abbott's conduct was the functional equivalent of a price squeeze is that Abbott sells Norvir both as a standalone inhibitor and as part of a boosted inhibitor. Plaintiffs' claim is that Abbott is using its monopoly position in the booster market to raise the price of Norvir and selling its own boosted inhibitor at too low a price. Thus, the court held that allegations of monopoly leveraging through pricing conduct in two markets do not state a claim under section 2 of the Sherman Act absent an antitrust refusal to deal or other exclusionary practice or below-cost pricing in the second market.

VII. Conclusion.

The Supreme Court has recently made some radical changes in federal antitrust law. All of those changes have placed restrictions on antitrust plaintiffs; either eliminating antitrust claims altogether or making it difficult for plaintiffs to establish antitrust violations. In some instances, venerated Supreme Court antitrust decisions were overturned. Whether one agrees or disagrees with the changes in federal antitrust law, it is important to understand the motivations of the Court embedded in the recent decisions. Antitrust cases are very expensive to pursue both for plaintiffs and defendants. An appreciation of the various motives and concepts reflected in the Court's decisions is important before embarking on antitrust litigation.


[1] 555 U.S. 438 (2009).

[2] 540 U.S. 398 (2004).

[3] 555 U.S. at 444.

[4] 509 U.S. 209 (1993).

[5] 555 U.S. at 457.

[6] 549 U.S. 312 (2007).

[7] An oligopoly is a market in which there are a small number of sellers which control the supply of goods or services. In an oligopoly, there is a high degree of interdependence among the sellers such that sellers' prices tend to be the same. An oligopoly contrasts with an oligopsony, which is a market in which there are a small number of buyers.

[8] 15 U.S.C. § 13(a).

[9] 509 U.S. at 212.

[10] Id. at 220. The type of injury that harms direct competitors of the discriminating seller is called "primary-line price discrimination."

[11] Id. at 218.

[12] Id.

[13] Id. at 219.

[14] Id.

[15] See Id. at 226 (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)). The Court cited several sources for this principle, but only three were empirically based: 1) McGee, "Predatory Price Cutting: The Standard Oil (N.J.) Case," 1 Journal of Law & Economics 137 (1958); 2) McGee, "Predatory Pricing Revisited," 23 Journal of Law & Economics 289 (1980), and 3) Roland H. Koller II, "The Myth of Predatory Pricing: An Empirical Study," 4 Antitrust Law & Economics Review 105 (1971). For a critique of these studies, see K. Anderson "Myths of Predatory Pricing," 9 Competition, No. 1, 37 (Summer/Fall 2000).

[16] 509 U.S. at 223 (quoting Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 340 (1990)).

[17] 509 U.S. at 221.

[18] Id. at 222.

[19] Id.

[20] Id. The Court recognized conflict among the circuit courts as to what is the appropriate measure of the rival's costs for purposes of defining the first prerequisite, but did not resolve the conflict.

[21] Id. at 224.

[22] Id.

[23] Id.

[24] Id.

[25] Id.

[26] Id. at 231.

[27] Id. (citing Atlantic Richfield Co., 495 U.S. at 340).

[28] 509 U.S. at 231.

[29] Id. at 225.

[30] Id. at 225-226 (quoting Matsushita, 475 U.S. at 590-91).

[31] Brooke Group, 509 U.S. at 226. The Court noted that in situations where the market is highly diffuse and competitive, or where new entry is easy, or the defendant lacks adequate excess capacity to absorb the market shares of its rivals and cannot quickly create or purchase new capacity, summary disposition of the case is appropriate. Id. Liggett's proof of the second prerequisite did not fail for these reasons, however, because the cigarette market did not have these characteristics.

[32] Id. at 227 (citing Matsushita, 475 U.S. at 588-90).

[33] 509 U.S. at 227 (citing Matsushita, 475 U.S. at 590). The Matsushita court granted summary adjudication to an allegation of predatory pricing by coconspirators.

[34] 509 U.S. at 228. Despite the Court's skepticism about the ability to recoup losses caused by below-cost pricing in an oligopolistic market, the Court did not adopt a per se rule that a plaintiff could never succeed in establishing an illegal predatory scheme in such a market. In fact, the Court rejected what it took to be the Fourth Circuit's ruling in the case that the interdependent pricing of an oligopoly may never provide a means for achieving recoupment, and so may never form the basis of a predatory pricing claim. Id. at 229.

[35] The Dissent accused the majority of abandoning its earlier acknowledgment that Liggett, as the prevailing party at trial, was entitled to have the evidence viewed in the light most favorable to it. "The Court's contrary conclusion [contrary to that of the jury] rests on a hodgepodge of legal, factual, and economic propositions that are insufficient, alone or together, to overcome the jury's assessment of the evidence." Id. at 254.

[36] Id. at 227.

[37] Id. at 238-39.

[38] Confederated Tribes of Siletz Indians of Ore. v. Weyerhaeuser Co., 411 F.3d 1030, 1037 (9th Cir. 2005).

[39] Id. at 318-19.

[40] Id. at 319 (citing Brooke Group, 509 U.S. at 223).

[41] Weyerhaeuser, 549 U.S. at 319 (citing Brooke Group, 509 U.S. at 223-24).

[42] 549 U.S. at 319 (citing Brooke Group, 509 U.S. at 224).

[43] 549 U.S. at 320 (citing Brooke Group, 509 U.S. at 226).

[44] 549 U.S. at 321.

[45] Id. at 323 (quoting Matsushita, 475 U.S. at 589).

[46] 549 U.S. at 323.

[47] Id.

[48] Id. at 325.

[49] Id.

[50] Id. at 326.

[51] Trinko, 540 U.S. at 407.

[52] Id. at 408.

[53] Id.

[54] Id.

[55] Id. at 409.

[56] Id. at 399 (discussing Aspen Skiing, 472 U.S. at 608, 610-611).

[57] Id.

[58] Id. at 411.

[59] Id.

[60] Id. at 412.

[61] Id. at 413.

[62] Id. at 412.

[63] Id. at 414 (quoting United States v. Microsoft Corp., 253 F.3d 34, 58 (C.A.D.C. 2001)(en banc)(per curiam), cert. denied, 122 S. Ct. 350 (2001)).

[64] 540 U.S. at 414.

[65] Id.

[66] Id. (quoting Brooke Group, 509 U.S. at 223).

[67] 540 U.S 414 (quoting P. Areeda, "Essential Facilities: An Epithet In Need of Limiting Principles," 58 Antitrust L. J. 841, 853 (1989)).

[68] Trinko, 540 U.S. at 415.

[69] 915 F.2d at 28.

[70] 555 U.S. at 438.

[71] In re AT&T Inc., 22 F.C.C.R. 5662, 5814 (2007).

[72] 555 U.S. at 447.

[73] Id. at 448 (citing United States v. Colgate & Co., 250 U.S. 300, 307 (1919)).

[74] Id. at 448.

[75] Id. at 450.

[76] Id. (citing Am. Tel. and Tel. Co. v. Cent. Office Tel., Inc., 524 U.S. 214, 223 (1998)).

[77] Id. at 451.

[78] Id. at 452.

[79] Id.

[80] 148 F.2d at 437-38; see Concord., 915 F.2d at 18.

[81] 555 U.S. at 454 (citing Concord, 915 F.2d at 25).

[82] 555 U.S. at 454 (quoting Concord, 915 F.2d at 25).

[83] Brooke Group, 509 U.S. at 225.

[84] 555 U.S. at 455.

[85] Id. at 456.

[86] 148 F.2d at 436.

[87] 555 U.S. at 444.

[88] 915 F.2d at 18.

[89] Brooke Group, 509 U.S. at 229.

[90] Stearns Airport Equip. Co. v. FMC Corp., 170 F.3d 518, 527 (5th Cir. 1999).

[91] See, e.g., Stearns Airport Equip. Co., (a claim for predatory pricing brought by one manufacturer of boarding bridges, which allow passengers to board and exit passenger airplanes, against a competitor rejected because there was no evidence of either under-cost bids or that recoupment of costs was possible); Advo, Inc. v. Phila. Newspapers, Inc., 51 F.3d 1191 (3d Cir 1995) (a direct mail marketing company's claim of predatory pricing against a newspaper, which had entered the preprinted advertising market, rejected because the plaintiff was unable to produce any evidence that the defendant newspaper offered to distribute circulars at prices below any relevant measure of cost); Virgin Atl. Airways Ltd. v. British Airways, PLC, 257 F.3d 256 (2d Cir. 2001) ( the plaintiff did not establish that the defendant's incentive agreements with travel agents and corporate customers constituted below cost pricing). But see, Spirit Airlines, Inc. v. Northwest Airlines, Inc., 431 F.3d 917 (6th Cir. 2006) (summary judgment for the defendant was reversed because of the plaintiff's evidence was sufficient for a trier of fact to find that a separate and distinct low-fare or leisure passenger market existed and that the plaintiff had presented evidence that once Spirit exited the market, Northwest raised its prices to recoup its losses during the predation).

[92] Brooke Group, 509 U.S. at 228.

[93] Id. at 224.

[94] Cascade Health Solutions v. PeaceHealth, 515 F.3d 883, 894 (9th Cir. 2008).

[95] Id.

[96] Id. at 895 and n. 6 (citing Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 12 (1984) ("[b]uyers often find package sales attractive...")).

[97] Id. at 897.

[98] Id. at 896.

[99] Id. The court in Cascade Health Solutions, quoted at length, a hypothetical example of such a situation described in Ortho Diagnostic Sys., Inc. v. Abbott Labs., Inc., 920 F. Supp. 455, 467 (S.D.N.Y. 1996).

[100] Id. at 897. See also, Ortho Diagnostic Sys., Inc., 920 F. Supp. 455 (S.D.N.Y. 1996); Le Page's Inc. v. 3M, 324 F.3d 141 (3d Cir. 2003) (en banc), cert. denied, 124 S. Ct. 2932 (2004).

[101] 324 F.3d 141.

[102] Id. at 145.

[103] 324 F.3d at 147.

[104] Id. at 151.

[105] Id.

[106] Id. at 152.

[107] 920 F. Supp. 455 (S.D.N.Y. 1996).

[108] 920 F. Supp. at 458.

[109] Id. at 463.

[110] Id. at 467.

[111] Id.

[112] Id. at 469.

[113] 515 F.3d at 898-903.

[114] Id. at 905-906.

[115] Id. at 910.

[116] Id. at 910 n.21.

[117] Id.

[118] 311 F. Supp 2d at 1113 (citing Trinko at 880).

[119] Id. (citing Trinko at 876-77).

[120] Id. (citing Trinko at 880).

[121] Id. at 879-880.

[122] Id. (citing Trinko at 879-80).

[123] Trinko at 881.

[124] 311 F. Supp 2d at 1114.

[125] 373 F. Supp. 2d at 633-34.

[126] 373 F. Supp 29 at 641 (citing Trinko at 410).

[127] Id. at 641 (citing Trinko at 412).

[128] Id. (citing Trinko at 415).

[129] Id.

[130] Otter Tail Power, Co. v. United States, 410 U.S. 366 (1973).

[131] Stand Energy, 373 F. Supp. at 641 (citing Otter Tail Power, 410 U.S. at 374-75).

[132] Id. (citing Otter Tail at 377).

[133] Trinko, 540 U.S. at 409.

[134] 555 U.S. at 453-54.

[135] 915 F.2d at 25. In Concord, the court criticized the use of a concept of "fair price" which is at the heart of any predatory pricing claim. "[H]ow is a judge or jury to determine a 'fair price?' Is it the price charged by other suppliers of the primary product? None exist. Is it the price that competition 'would have set' were the primary level not monopolized? How can the court determine this price without examining costs and demands, indeed without acting like a rate-setting regulatory agency, the rate-setting proceedings of which often last for several years? Further, how is the court to decide the proper size of the price 'gap?' Must it be large enough for all independent competing firms to make a 'living profit,' no matter how inefficient they may be? ... And how should the court respond when costs or demands change over time, as they inevitably will?" 555 U.S. at 454 (quoting Concord, 915 F.2d at 25).

[136] Id.

[137] 915 F. 2d at 28.

[138] 555 U.S at 452-53 .

[139] Id. at 453.

[140] Id. at 454.

[141] John Doe 1 v. Abbott Laboratories, 571 F.3d 930 (9th Cir. 2009).

[142] Id. at 931.

[143] Id. at 932.

[144] Id. at 931.

[145] Id. at 934.

[146] Id. at 933.

[147] Id. at 935.

[148] Id.

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