(Slip Opinion) OCTOBER TERM, 2006 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
WEYERHAEUSER CO. v. ROSS-SIMMONS HARD
WOOD LUMBER CO., INC.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE NINTH CIRCUIT
No. 05–381. Argued November 28, 2006—Decided February 20, 2007
Respondent Ross-Simmons, a sawmill, filed suit under §2 of the
Sherman Act, alleging that petitioner Weyerhaeuser drove it out of
business by bidding up the price of sawlogs to a level that prevented
Ross-Simmons from being profitable. The District Court, inter alia,
rejected Weyerhaeuser’s proposed predatory-bidding jury instructions
that incorporated elements of the test applied to predatory-pricing
claims in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.,
509 U. S. 209. The jury returned a verdict against Weyerhaeuser.
The Ninth Circuit affirmed, rejecting Weyerhaeuser’s argument that
Brooke Group’s standard should apply to predatory-bidding claims.
Held: The test this Court applied to predatory-pricing claims in Brooke
Group also applies to predatory-bidding claims. Pp. 4–13.
(a) Predatory pricing is a scheme in which the predator reduces the
sale price of its product hoping to drive competitors out of business
and, once competition has been vanquished, raises prices to a supra-
competitive level. Brooke Group established two prerequisites to re
covery on a predatory-pricing claim: First, a plaintiff must show that
the prices complained of are below cost, 509 U. S., at 222, because al
lowing recovery for above-cost price cutting could chill conduct—price
cutting—that directly benefits consumers. Second, a plaintiff must
show that the alleged predator had “a dangerous probability of re
couping its investment in below-cost pricing,” id., at 224, because
without such a probability, it is highly unlikely that a firm would en
gage in predatory pricing. The costs of erroneous findings of preda
tory-pricing liability are quite high because “ ‘[t]he mechanism by
which a firm engages in predatory pricing—lowering prices—is the
same mechanism by which a firm stimulates competition,’ ” and
2 WEYERHAEUSER CO. v. ROSS-SIMMONS HARDWOOD
LUMBER CO.
Syllabus
therefore, mistaken liability findings would “ ‘ “chill the very conduct
the antitrust laws are designed to protect.” ’ ” Id., at 26. Pp. 4–7.
(b) Predatory bidding involves the exercise of market power on the
market’s buy, or input, side. To engage in predatory bidding, a pur
chaser bids up the market price of an input so high that rival buyers
cannot survive, thus acquiring monopsony power, which is market
power on the buy side of the market. Once a predatory bidder causes
competing buyers to exit the market, it will attempt to drive down
input prices to reap supracompetitive profits that will at least offset
the losses it suffered in bidding up input prices. Pp. 7–8.
(c) Predatory-pricing and predatory-bidding claims are analytically
similar. And the close theoretical connection between monopoly and
monopsony suggests that similar legal standards should apply to
both sorts of claims. Both involve the deliberate use of unilateral
pricing measures for anticompetitive purposes and both require firms
to incur certain short-term losses on the chance that they might later
make supracompetitive profits. More importantly, predatory bidding
mirrors predatory pricing in respects deemed significant in Brooke
Group. Because rational businesses will rarely suffer short-term
losses in hopes of reaping supracompetitive profits, Brooke Group’s
conclusion that “ ‘predatory pricing schemes are rarely tried, and
even more rarely successful,’ ” 509 U. S., at 226, applies with equal
force to predatory-bidding schemes. And like the predatory conduct
in Brooke Group, actions taken in a predatory-bidding scheme are of
ten “ ‘ “the very essence of competition,” ’ ” ibid., because a failed
predatory-bidding scheme can be a “boon to consumers,” see id., at
224. Predatory bidding also presents less of a direct threat of con
sumer harm than predatory pricing, which achieves ultimate success
by charging higher prices to consumers, because a predatory bidder
does not necessarily rely on raising prices in the output market to re
coup its losses. Pp. 8–12.
(d) Given these similarities, Brooke Group’s two-pronged test
should apply to predatory-bidding claims. A predatory-bidding plain
tiff must prove that the predator’s bidding on the buy side caused the
cost of the relevant output to rise above the revenues generated in
the sale of those outputs. Because the risk of chilling procompetitive
behavior with too lax a liability standard is as serious here as it was
in Brooke Group, only higher bidding that leads to below-cost pricing
in the relevant output market will suffice as a basis for predatory-
bidding liability. A predatory-bidding plaintiff also must prove that
the defendant has a dangerous probability of recouping the losses in
curred in bidding up input prices through the exercise of monopsony
power. Making such a showing will require “a close analysis of both
the scheme alleged by the plaintiff and the [relevant market’s] struc
Cite as: 549 U. S. ____ (2007) 3
Syllabus
ture and conditions,” 509 U. S., at 226. Pp. 12–13.
(e) Because Ross-Simmons has conceded that it has not satisfied
the Brooke Group standard, its predatory-bidding theory of liability
cannot support the jury’s verdict. P. 13.
411 F. 3d 1030, vacated and remanded.
THOMAS, J., delivered the opinion for a unanimous Court.
Cite as: 549 U. S. ____ (2007) 1
Opinion of the Court
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SUPREME COURT OF THE UNITED STATES
_________________
No. 05–381
_________________
WEYERHAEUSER COMPANY, PETITIONER v. ROSS
SIMMONS HARDWOOD LUMBER COMPANY, INC.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE NINTH CIRCUIT
[February 20, 2007]
JUSTICE THOMAS delivered the opinion of the Court.
Respondent Ross-Simmons, a sawmill, sued petitioner
Weyerhaeuser, alleging that Weyerhaeuser drove it out of
business by bidding up the price of sawlogs to a level that
prevented Ross-Simmons from being profitable. A jury
returned a verdict in favor of Ross-Simmons on its mo
nopolization claim, and the Ninth Circuit affirmed. We
granted certiorari to decide whether the test we applied to
claims of predatory pricing in Brooke Group Ltd. v. Brown
& Williamson Tobacco Corp., 509 U. S. 209 (1993), also
applies to claims of predatory bidding. We hold that it
does. Accordingly, we vacate the judgment of the Court of
Appeals.
I
This antitrust case concerns the acquisition of red alder
sawlogs by the mills that process those logs in the Pacific
Northwest. These hardwood-lumber mills usually acquire
logs in one of three ways. Some logs are purchased on the
open bidding market. Some come to the mill through
standing short- and long-term agreements with timber
land owners. And others are harvested from timberland
2 WEYERHAEUSER CO. v. ROSS-SIMMONS HARDWOOD
LUMBER CO.
Opinion of the Court
owned by the sawmills themselves. The allegations rele
vant to our decision in this case relate to the bidding
market.
Ross-Simmons began operating a hardwood-lumber
sawmill in Longview, Washington, in 1962. Weyerhaeuser
entered the Northwestern hardwood-lumber market in
1980 by acquiring an existing lumber company. Weyer
haeuser gradually increased the scope of its hardwood-
lumber operation, and it now owns six hardwood sawmills
in the region. By 2001, Weyerhaeuser’s mills were acquir
ing approximately 65 percent of the alder logs available
for sale in the region. App. 754a, 341a.
From 1990 to 2000, Weyerhaeuser made more than $75
million in capital investments in its hardwood mills in the
Pacific Northwest. Id., at 159a. During this period, pro
duction increased at every Northwestern hardwood mill
that Weyerhaeuser owned. Id., at 160a. In addition to
increasing production, Weyerhaeuser used “state-of-the
art technology,” id., at 500a, including sawing equipment,
to increase the amount of lumber recovered from every log,
id., at 500a, 549a. By contrast, Ross-Simmons appears to
have engaged in little efficiency-enhancing investment.
See id., at 438a–441a.
Logs represent up to 75 percent of a sawmill’s total
costs. See id., at 169a. And from 1998 to 2001, the price
of alder sawlogs increased while prices for finished hard
wood lumber fell. These divergent trends in input and
output prices cut into the mills’ profit margins, and Ross-
Simmons suffered heavy losses during this time. See id.,
at 155a (showing a negative net income from 1998 to
2000). Saddled with several million dollars in debt, Ross-
Simmons shut down its mill completely in May 2001. Id.,
at 156a.
Ross-Simmons blamed Weyerhaeuser for driving it out
of business by bidding up input costs, and it filed an anti
trust suit against Weyerhaeuser for monopolization and
Cite as: 549 U. S. ____ (2007) 3
Opinion of the Court
attempted monopolization under §2 of the Sherman Act.
See 26 Stat. 209, as amended, 15 U. S. C. §2 (2000 ed.,
Supp. IV). Ross-Simmons alleged that, among other anti-
competitive acts, Weyerhaeuser had used “its dominant
position in the alder sawlog market to drive up the prices
for alder sawlogs to levels that severely reduced or elimi
nated the profit margins of Weyerhaeuser’s alder sawmill
competition.” App. 135a. Proceeding in part on this
“predatory-bidding” theory, Ross-Simmons argued that
Weyerhaeuser had overpaid for alder sawlogs to cause
sawlog prices to rise to artificially high levels as part of a
plan to drive Ross-Simmons out of business. As proof that
this practice had occurred, Ross-Simmons pointed to Wey
erhaeuser’s large share of the alder purchasing market,
rising alder sawlog prices during the alleged predation
period, and Weyerhaeuser’s declining profits during that
same period.
Prior to trial, Weyerhaeuser moved for summary judg
ment on Ross-Simmons’ predatory-bidding theory. Id., at
6a–24a. The District Court denied the motion. Id., at
58a–69a. At the close of the 9-day trial, Weyerhaeuser
moved for judgment as a matter of law, or alternatively,
for a new trial. The motions were based in part on Wey
erhaeuser’s argument that Ross-Simmons had not satis
fied the standard this Court set forth in Brooke Group,
supra. App. 940a–942a. The District Court denied Wey
erhaeuser’s motion. Id., at 720a, App. to Pet. for Cert.
46a. The District Court also rejected proposed predatory-
bidding jury instructions that incorporated elements of the
Brooke Group test. App. 725a–730a, 978a. Ultimately,
the District Court instructed the jury that Ross-Simmons
could prove that Weyerhaeuser’s bidding practices were
anticompetitive acts if the jury concluded that Weyer
haeuser “purchased more logs than it needed, or paid a
higher price for logs than necessary, in order to prevent
[Ross-Simmons] from obtaining the logs they needed at a
4 WEYERHAEUSER CO. v. ROSS-SIMMONS HARDWOOD
LUMBER CO.
Opinion of the Court
fair price.” Id., at 978a. Finding that Ross-Simmons had
proved its claim for monopolization, the jury returned a
$26 million verdict against Weyerhaeuser. Id., at 967a.
The verdict was trebled to approximately $79 million.
Weyerhaeuser appealed to the Court of Appeals for the
Ninth Circuit. There, Weyerhaeuser argued that Brooke
Group’s standard for claims of predatory pricing should
also apply to claims of predatory bidding. The Ninth
Circuit disagreed and affirmed the verdict against Weyer
haeuser. Confederated Tribes of Siletz Indians of Ore. v.
Weyerhaeuser Co., 411 F. 3d 1030, 1035–1036 (2005).
The Court of Appeals reasoned that “buy-side predatory
bidding” and “sell-side predatory pricing,” though similar,
are materially different in that predatory bidding does not
necessarily benefit consumers or stimulate competition in
the way that predatory pricing does. Id., at 1037. Con
cluding that “the concerns that led the Brooke Group
Court to establish a high standard of liability in the preda
tory-pricing context do not carry over to this predatory
bidding context with the same force,” the Court of Appeals
declined to apply Brooke Group to Ross-Simmons’ claims
of predatory bidding. 411 F. 3d, at 1038. The Court of
Appeals went on to conclude that substantial evidence
supported a finding of liability on the predatory-bidding
theory. Id., at 1045. We granted certiorari to decide
whether Brooke Group applies to claims of predatory
bidding. 548 U. S. ___ (2006). We hold that it does, and
we vacate the Court of Appeals’ judgment.
II
In Brooke Group, we considered what a plaintiff must
show in order to succeed on a claim of predatory pricing
under §2 of the Sherman Act.1 In a typical predatory
——————
1 Brooke Group dealt with a claim under the Robinson-Patman Act,
but as we observed, “primary-line competitive injury under the Robin
son-Patman Act is of the same general character as the injury inflicted
Cite as: 549 U. S. ____ (2007) 5
Opinion of the Court
pricing scheme, the predator reduces the sale price of its
product (its output) to below cost, hoping to drive competi
tors out of business. Then, with competition vanquished,
the predator raises output prices to a supracompetitive
level. See Matsushita Elec. Industrial Co. v. Zenith Radio
Corp., 475 U. S. 574, 584–585, n. 8 (1986) (describing
predatory pricing). For the scheme to make economic
sense, the losses suffered from pricing goods below cost
must be recouped (with interest) during the supracompeti
tive-pricing stage of the scheme. Id., at 588–589; Cargill,
Inc. v. Monfort of Colo., Inc., 479 U. S. 104, 121–122, n. 17
(1986); see also R. Bork, The Antitrust Paradox 145
(1978). Recognizing this economic reality, we established
two prerequisites to recovery on claims of predatory pric
ing. “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 meas
ure of its rival’s costs.” Brooke Group, 509 U. S., at 222.
Second, a plaintiff must demonstrate that “the competitor
had . . . a dangerous probabilit[y] of recouping its invest
ment in below-cost prices.” Id., at 224.
The first prong of the test—requiring that prices be
below cost—is necessary because “[a]s a general rule, the
exclusionary effect of prices above a relevant measure of
cost either reflects the lower cost structure of the alleged
predator, and so represents competition on the merits, or
is beyond the practical ability of a judicial tribunal to
control.” Id., at 223. We were particularly wary of allow
ing recovery for above-cost price cutting because allowing
such claims could, perversely, “chil[l] legitimate price
cutting,” which directly benefits consumers. See id., at
——————
by predatory pricing schemes actionable under §2 of the Sherman Act.”
509 U. S., at 221. Because of this similarity, the standard adopted in
Brooke Group applies to predatory-pricing claims under §2 of the
Sherman Act. Id., at 222.
6 WEYERHAEUSER CO. v. ROSS-SIMMONS HARDWOOD
LUMBER CO.
Opinion of the Court
223–224; Atlantic Richfield Co. v. USA Petroleum Co., 495
U. S. 328, 340 (1990) (“Low prices benefit consumers
regardless of how those prices are set, and so long as they
are above predatory levels, they do not threaten competi
tion”). Thus, we specifically declined to allow plaintiffs to
recover for above-cost price cutting, concluding that “dis
couraging a price cut and . . . depriving consumers of the
benefits of lower prices . . . does not constitute sound
antitrust policy.” Brooke Group, supra, at 224.
The second prong of the Brooke Group test—requiring
that there be a dangerous probability of recoupment of
losses—is necessary because, without a dangerous prob
ability of recoupment, it is highly unlikely that a firm
would engage in predatory pricing. As the Court ex
plained in Matsushita, a firm engaged in a predatory-
pricing scheme makes an investment—the losses suffered
plus the profits that would have been realized absent the
scheme—at the initial, below-cost-selling phase. 475
U. S., at 588–589. For that investment to be rational, a
firm must reasonably expect to recoup in the long run at
least its original investment with supracompetitive prof
its. Ibid.; Brooke Group, 509 U. S., at 224. Without such a
reasonable expectation, a rational firm would not willingly
suffer definite, short-run losses. Recognizing the central
ity of recoupment to a predatory-pricing scheme, we re
quired predatory-pricing plaintiffs to “demonstrate that
there is a likelihood that the predatory scheme alleged
would cause a rise in prices above a competitive level that
would be sufficient to compensate for the amounts ex
pended on the predation, including the time value of the
money invested in it.” Id., at 225.
We described the two parts of the Brooke Group test as
“essential components of real market injury” that were
“not easy to establish.” Id., at 226. We also reiterated
that the costs of erroneous findings of predatory-pricing
liability were quite high because “ ‘[t]he mechanism by
Cite as: 549 U. S. ____ (2007) 7
Opinion of the Court
which a firm engages in predatory pricing—lowering
prices—is the same mechanism by which a firm stimulates
competition,’ ” and therefore, mistaken findings of liability
would “ ‘ “chill the very conduct the antitrust laws are
designed to protect.” ’ ” Ibid. (quoting Cargill, supra, at
122, n. 17).
III
Predatory bidding, which Ross-Simmons alleges in this
case, involves the exercise of market power on the buy side
or input side of a market. In a predatory-bidding scheme,
a purchaser of inputs “bids up the market price of a criti
cal input to such high levels that rival buyers cannot
survive (or compete as vigorously) and, as a result, the
predating buyer acquires (or maintains or increases its)
monopsony power.” Kirkwood, Buyer Power and Exclu
sionary Conduct, 72 Antitrust L. J. 625, 652 (2005) (here
inafter Kirkwood). Monopsony power is market power on
the buy side of the market. Blair & Harrison, Antitrust
Policy and Monopsony, 76 Cornell L. Rev. 297 (1991). As
such, a monopsony is to the buy side of the market what a
monopoly is to the sell side and is sometimes colloquially
called a “buyer’s monopoly.” See id., at 301, 320; Piraino,
A Proposed Antitrust Approach to Buyers’ Competitive
Conduct, 56 Hastings L. J. 1121, 1125 (2005).
A predatory bidder ultimately aims to exercise the
monopsony power gained from bidding up input prices. To
that end, once the predatory bidder has caused competing
buyers to exit the market for purchasing inputs, it will
seek to “restrict its input purchases below the competitive
level,” thus “reduc[ing] the unit price for the remaining
input[s] it purchases.” Salop, Anticompetitive Overbuying
by Power Buyers, 72 Antitrust L. J. 669, 672 (2005) (here
inafter Salop). The reduction in input prices will lead to “a
significant cost saving that more than offsets the profit[s]
that would have been earned on the output.” Ibid. If all
8 WEYERHAEUSER CO. v. ROSS-SIMMONS HARDWOOD
LUMBER CO.
Opinion of the Court
goes as planned, the predatory bidder will reap monopson
istic profits that will offset any losses suffered in bidding
up input prices.2 (In this case, the plaintiff was the defen
dant’s competitor in the input-purchasing market. Thus,
this case does not present a situation of suppliers suing a
monopsonist buyer under §2 of the Sherman Act, nor does
it present a risk of significantly increased concentration in
the market in which the monopsonist sells, i.e., the market
for finished lumber.)
IV
A
Predatory-pricing and predatory-bidding claims are
analytically similar. See Hovenkamp, The Law of Exclu
sionary Pricing, 2 Competition Policy Int’l, No. 1, pp. 21,
35 (Spring 2006). This similarity results from the close
theoretical connection between monopoly and monopsony.
See Kirkwood 653 (describing monopsony as the “mirror
image” of monopoly); Khan v. State Oil Co., 93 F. 3d 1358,
1361 (CA7 1996) (“[M]onopsony pricing . . . is analytically
the same as monopoly or cartel pricing and [is] so treated
by the law”), vacated and remanded on other grounds, 522
U. S. 3 (1997); Vogel v. American Soc. of Appraisers, 744
F. 2d 598, 601 (CA7 1984) (“[M]onopoly and monopsony
are symmetrical distortions of competition from an eco
nomic standpoint”); see also Hearing on Monopsony Issues
in Agriculture: Buying Power of Processors in Our Na
tion’s Agricultural Markets before the Senate Committee
on the Judiciary, 108th Cong., 1st Sess., 3 (2004). The
——————
2 If
the predatory firm’s competitors in the input market and the out
put market are the same, then predatory bidding can also lead to the
bidder’s acquisition of monopoly power in the output market. In that
case, which does not appear to be present here, the monopsonist could,
under certain market conditions, also recoup its losses by raising
output prices to monopolistic levels. See Salop 679–682 (describing a
monopsonist’s predatory strategy that depends upon raising prices in
the output market).
Cite as: 549 U. S. ____ (2007) 9
Opinion of the Court
kinship between monopoly and monopsony suggests that
similar legal standards should apply to claims of monopo
lization and to claims of monopsonization. Cf. Noll,
“Buyer Power” and Economic Policy, 72 Antitrust L. J.
589, 591 (2005) (“[A]symmetric treatment of monopoly and
monopsony has no basis in economic analysis”).
Tracking the economic similarity between monopoly and
monopsony, predatory-pricing plaintiffs and predatory-
bidding plaintiffs make strikingly similar allegations. A
predatory-pricing plaintiff alleges that a predator cut
prices to drive the plaintiff out of business and, thereby, to
reap monopoly profits from the output market. In parallel
fashion, a predatory-bidding plaintiff alleges that a preda
tor raised prices for a key input to drive the plaintiff out of
business and, thereby, to reap monopsony profits in the
input market. Both claims involve the deliberate use of
unilateral pricing measures for anticompetitive purposes.3
And both claims logically require firms to incur short-term
losses on the chance that they might reap supracompeti
tive profits in the future.
B
More importantly, predatory bidding mirrors predatory
pricing in respects that we deemed significant to our
analysis in Brooke Group. In Brooke Group, we noted that
“ ‘predatory pricing schemes are rarely tried, and even
——————
3 Predatory bidding on inputs is not analytically different from preda
tory overbuying of inputs. Both practices fall under the rubric of
monopsony predation and involve an input purchaser’s use of input
prices in an attempt to exclude rival input purchasers. The economic
effect of the practices is identical: input prices rise. In a predatory-
bidding scheme, the purchaser causes prices to rise by offering to pay
more for inputs. In a predatory-overbuying scheme, the purchaser
causes prices to rise by demanding more of the input. Either way,
input prices increase. Our use of the term “predatory bidding” is not
meant to suggest that different legal treatment is appropriate for the
economically identical practice of “predatory overbuying.”
10 WEYERHAEUSER CO. v. ROSS-SIMMONS HARDWOOD
LUMBER CO.
Opinion of the Court
more rarely successful.’ ” 509 U. S., at 226 (quoting Mat
sushita, 475 U. S., at 589). Predatory pricing requires a
firm to suffer certain losses in the short term on the
chance of reaping supracompetitive profits in the future.
Id., at 588–589. A rational business will rarely make this
sacrifice. Ibid. The same reasoning applies to predatory
bidding. A predatory-bidding scheme requires a buyer of
inputs to suffer losses today on the chance that it will reap
supracompetitive profits in the future. For this reason,
“[s]uccessful monopsony predation is probably as unlikely
as successful monopoly predation.” R. Blair & J. Harrison,
Monopsony 66 (1993).
And like the predatory conduct alleged in Brooke Group,
actions taken in a predatory-bidding scheme are often
“ ‘ “the very essence of competition.” ’ ” 509 U. S., at 226
(quoting Cargill, 479 U. S., at 122, n. 17, in turn quoting
Matsushita, supra, at 594). Just as sellers use output
prices to compete for purchasers, buyers use bid prices to
compete for scarce inputs. There are myriad legitimate
reasons—ranging from benign to affirmatively procom
petitive—why a buyer might bid up input prices. A firm
might bid up inputs as a result of miscalculation of its
input needs or as a response to increased consumer de
mand for its outputs. A more efficient firm might bid up
input prices to acquire more inputs as a part of a procom
petitive strategy to gain market share in the output mar
ket. A firm that has adopted an input-intensive produc
tion process might bid up inputs to acquire the inputs
necessary for its process. Or a firm might bid up input
prices to acquire excess inputs as a hedge against the risk
of future rises in input costs or future input shortages.
See Salop 682–683; Kirkwood 655. There is nothing illicit
about these bidding decisions. Indeed, this sort of high
bidding is essential to competition and innovation on the
Cite as: 549 U. S. ____ (2007) 11
Opinion of the Court
buy side of the market.4
Brooke Group also noted that a failed predatory-pricing
scheme may benefit consumers. 509 U. S., at 224. The
potential benefit results from the difficulty an aspiring
predator faces in recouping losses suffered from below-cost
pricing. Without successful recoupment, “predatory pric
ing produces lower aggregate prices in the market, and
consumer welfare is enhanced.” Ibid. Failed predatory-
bidding schemes can also, but will not necessarily, benefit
consumers. See Salop 677–678. In the first stage of a
predatory-bidding scheme, the predator’s high bidding will
likely lead to its acquisition of more inputs. Usually, the
acquisition of more inputs leads to the manufacture of
more outputs. And increases in output generally result in
lower prices to consumers.5 Id., at 677; R. Blair & J.
Harrison, supra, at 66–67. Thus, a failed predatory-
bidding scheme can be a “boon to consumers” in the same
way that we considered a predatory-pricing scheme to be.
See Brooke Group, supra, at 224.
In addition, predatory bidding presents less of a direct
threat of consumer harm than predatory pricing. A preda
tory-pricing scheme ultimately achieves success by charg
ing higher prices to consumers. By contrast, a predatory-
bidding scheme could succeed with little or no effect on
consumer prices because a predatory bidder does not
necessarily rely on raising prices in the output market to
recoup its losses. Salop 676. Even if output prices remain
constant, a predatory bidder can use its power as the
——————
4 Higher prices for inputs obviously benefit existing sellers of inputs
and encourage new firms to enter the market for input sales as well.
5 Consumer benefit does not necessarily result at the first stage be
cause the predator might not use its excess inputs to manufacture
additional outputs. It might instead destroy the excess inputs. See
Salop 677, n. 22. Also, if the same firms compete in the input and
output markets, any increase in outputs by the predator could be offset
by decreases in outputs from the predator’s struggling competitors.
12 WEYERHAEUSER CO. v. ROSS-SIMMONS HARDWOOD
LUMBER CO.
Opinion of the Court
predominant buyer of inputs to force down input prices
and capture monopsony profits. Ibid.
C
The general theoretical similarities of monopoly and
monopsony combined with the theoretical and practical
similarities of predatory pricing and predatory bidding
convince us that our two-pronged Brooke Group test
should apply to predatory-bidding claims.
The first prong of Brooke Group’s test requires little
adaptation for the predatory-bidding context. A plaintiff
must prove that the alleged predatory bidding led to be
low-cost pricing of the predator’s outputs. That is, 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. As with predatory
pricing, the exclusionary effect of higher bidding that does
not result in below-cost output pricing “is beyond the
practical ability of a judicial tribunal to control without
courting intolerable risks of chilling legitimate” procom
petitive conduct. 509 U. S., at 223. Given the multitude of
procompetitive ends served by higher bidding for inputs,
the risk of chilling procompetitive behavior with too lax a
liability standard is as serious here as it was in Brooke
Group. Consequently, only higher bidding that leads to
below-cost pricing in the relevant output market will
suffice as a basis for liability for predatory bidding.
A predatory-bidding 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. Absent proof of likely re
coupment, a strategy of predatory bidding makes no eco
nomic sense because it would involve short-term losses
with no likelihood of offsetting long-term gains. Cf. id., at
224 (citing Matsushita, 475 U. S., at 588–589). As with
predatory pricing, making a showing on the recoupment
Cite as: 549 U. S. ____ (2007) 13
Opinion of the Court
prong will require “a close analysis of both the scheme
alleged by the plaintiff and the structure and conditions of
the relevant market.” Brooke Group, supra, at 226.
Ross-Simmons has conceded that it has not satisfied the
Brooke Group standard. Brief for Respondent 49; Tr. of
Oral Arg. 49. Therefore, its predatory-bidding theory of
liability cannot support the jury’s verdict.
V
For these reasons, we vacate the judgment of the Court
of Appeals and remand the case for further proceedings
consistent with this opinion.
It is so ordered.