Supreme Court to review Oregon antitrust case

Last week the U.S. Supreme Court agreed to review two antitrust cases -- one from the Second Circuit and the other from right here in Oregon. 

The Oregon case, Ross-Simmons Hardwood Lumber Co., Inc. v. Weyerhaeuser Co., will join Northwest Stationers v. Pacific Stationery in the pantheon of Supreme Court antitrust cases originating in our corner of the world. 

Ross-Simmons addresses the rarely-litigated issue of an illegal monopsony -- also called a buyer-side monopoly, where a single buyer purchases most or all of the output of many suppliers.  Plaintiff in that case, owner of a small saw mill, prevailed on a claim that Weyerhaeuser illegally used its monopsony power to bid up the purchase price of alder logs to supply its sawmills, driving out competing sawmills that could not afford to pay the high input prices.  The challenged activity has been called "predatory bidding" -- the flip side of predatory pricing, which the Supreme Court has most recently addressed in Brooke Group Ltd v. Brown & Williamson Tobacco Co.

One element of the case is noteworthy:  District Judge Panner and the Ninth Circuit concluded that the supply market for alder sawlogs is inelastic, meaning that when Weyerhaeuser bid up the price for logs, there was no source of additional supply.  As a consequence, new suppliers could not enter the market, add to the supply, and bring down the price to levels that competing sawmills could afford.  It was the limited supply of sawlogs that enabled Weyerhaeuser to carry out its scheme to eliminate competing sawmills.

The holding in Ross-Simmons suggests that large purchasers must now monitor the elasticity of the input market when increasing their purchases, so as to determine the potential effect of a rise in input prices.  The Solicitor General, in urging the Supreme Court to accept review, said such an inquiry is fraught with ambiguity and uncertainty, and fails to advance the need for easy-to-administer rules on pricing behavior.