The U.S. Supreme Court will hear arguments next month about a ruling that Oregon and seven other states say is critical in stopping big companies from getting away with illegal monopolies in forest products, agriculture and high-tech goods.
Attorneys general from Oregon, California, Arizona, Iowa, Louisiana, Montana, West Virginia and Wisconsin recently submitted a court brief that comes down against an argument by Weyerhaeuser Co., the timber giant.
The case led to a $79 million judgment against Weyerhaeuser, prompting settlements and judgments totaling about another $50 million.
The states did not explicitly support a 2003 Portland federal jury verdict that found Weyerhaeuser had created an illegal monopoly in the market for alder sawlogs. But they wrote stridently against a tough new legal standard for antitrust plaintiffs that Weyerhaeuser is seeking. Rejection of Weyerhaeuser's argument and adoption of a more lenient one, the states wrote, could bar a single firm from dominating government timber auctions, protect small businesses and ensure competition for government contracts.
"It's always significant when a government body, especially a major government body, signs on in support of a private plaintiff," said Jack Kirkwood, an antitrust expert at Seattle University School of Law who has consulted for the case's plaintiffs. "The states represent a public interest that the private plaintiff may not."
The states' chiming in raises the profile of a case that was fought mostly in obscurity until the last year or so. In part, it caught little attention because it dealt with alder, a native Northwest hardwood species used in musical instruments and furniture. It is not nearly as widespread as softwood lumber, such as Douglas fir, used in home construction.
It also mainly affects instances in which one competitor has at least 55 percent market share, one of many prerequisites for antitrust concern.
The case has caught national attention as a rare antitrust case to make it to the nation's highest court. As with all cases before the Supreme Court, the Weyerhaeuser case could set a precedent governing business competition nationwide.
Other elements, legal and political, add to the interest. It will be among the first major antitrust cases to be decided by a court that includes Chief Justice John Roberts and Justice Samuel Alito, and so could point to their position on antitrust issues.
The Weyerhaeuser case also presents questions about business conduct in competition for supplies, what economists call "inputs," for industrial processes. Antitrust cases more commonly turn on whether a large company unfairly reduced prices to undermine competitors, with the aim of controlling a market and, in the long term, using that power to increase prices.
The New York Times editorial board, in a critique of Bush administration antitrust enforcement last week, cited the alder log case.
"Not only has the government failed to bring many significant cases, it is opposing one brought and won by a third party," the newspaper wrote.
Trial in Portland
In a federal trial in 2003 in Portland, Ross-Simmons Hardwood Lumber Co. of Longview, Wash., alleged that Weyerhaeuser's Portland-based hardwoods division unfairly forced Ross-Simmons out of business.
Weyerhaeuser officials crafted exclusive contracts that guaranteed it could buy logs from some of the Northwest's largest landowners, causing log shortages for competitors, Ross-Simmons alleged. Weyerhaeuser bought alder sawlogs, even when it didn't need them, in some cases letting the logs rot rather than letting them to go to competitors, Ross-Simmons said.
The timber giant established a dominant presence in the market for alder logs, and plaintiffs say internal Weyerhaeuser documents showed a long-term plan to use that presence to force down the price it paid for logs.
Weyerhaeuser has denied all allegations in the lawsuit. It has settled cases that used the Ross-Simmons case as a precedent.
The issue before the Supreme Court pivots on how juries should decide when a dominant company's purchasing practices constitute illegal "predatory bidding."
Two-part test
The court has a well-established test for "predatory pricing," a more common illegal strategy in which companies offer products for below-cost prices to pressure competitors. In a 1993 case called Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., the Supreme Court established that plaintiffs in predatory-pricing cases must meet a two-part test: They must show that a monopolist lost money by reducing prices and that it was likely to recoup its losses later by increasing prices.
Weyerhaeuser's attorneys say the Brooke Group test should apply to predatory bidding. But in the Ross-Simmons trial, they wrote, Judge Owen Panner used an unduly vague subjective test, like "throwing a marshmallow" at a jury.
Panner asked the jury to decide whether Weyerhaeuser bought more logs than it "needed" and whether it paid a higher price than "necessary" to prevent competitors from obtaining logs "at a fair price."
"Under the Ninth Circuit's wholly subjective rule, it is impossible for businesses to know what pricing decisions conform with the law," Weyerhaeuser wrote. "Firms accordingly will be forced to curb aggressive -- and desirable -- competitive bidding for fear of triggering unwarranted liability; and baseless litigation will be encouraged."
Other factors
The states attorneys general and Ross-Simmons' attorneys say the jury weighed more than just those few phrases, looking at Weyerhaeuser's dominance in the alder log market and evidence that the company intended to force competitors out of business.
The Brooke Group test is unworkable, the states argue. Monopolists could use other subsidiaries to offset losses in a given market so that they would not need to operate at a loss.
And, the states ask, what if the higher input cost is relatively small as a percentage of the product cost? Under that scenario, monopolists still could make profits while paying a much higher price for the input. And, if the input is essential to production of the end product, the increased price could cut off competitors and push them out of business.
Such a test would be too difficult for small companies to meet, the states wrote.
"You have a standard that we contend is not workable and will produce a lot of false negatives," said Emilio Varanini, deputy attorney general for California. "It will let a lot of people off who should not be getting off."
Varanini and Tim Nord, assistant attorney general for Oregon, co-wrote the states' brief, submitted Oct. 12.The Oregonian
