us supreme court: 05-381

8/14/2019 US Supreme Court: 05-381

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Official - Subject to Final Review

IN THE SUPREME COURT OF THE UNITED STATES

- - - - - - - - - - - - - - - - - x

WEYERHAEUSER COMPANY, :

Petitioner :

v. : No. 05-381

ROSS-SIMMONS HARDWOOD :

LUMBER COMPANY, INC. :

- - - - - - - - - - - - - - - - - x

Washington, D.C.

Tuesday, November 28, 2006

The above-entitled matter came on for oral

argument before the Supreme Court of the United States

at 10:02 a.m.

APPEARANCES:

ANDREW J. PINCUS, ESQ., Washington, D.C.; on behalf of

Petitioner.

KANNON K. SHANMUGAM, ESQ., Assistant to the Solicitor

General, Department of Justice, Washington, D.C.; on

behalf of the United States, as amicus curiae,

supporting Petitioner.

MICHAEL E. HAGLUND, ESQ., Portland, Ore.; on behalf of

Respondent

1Alderson Reporting Company



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C O N T E N T S

ORAL ARGUMENT OF PAGE

ANDREW J. PINCUS, ESQ.

On behalf of the Petitioner 3

ORAL ARGUMENT OF

KANNON K. SHANMUGAM, ESQ.

On behalf of the United States, as amicus

curiae, supporting Petitioner 19

ORAL ARGUMENT OF

MICHAEL E. HAGLUND, ESQ.

On behalf of the Respondent 28

REBUTTAL ARGUMENT OF

ANDREW J. PINCUS, ESQ.

On behalf of Petitioner 51




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P R O C E E D I N G S

(10:02 a.m.)

CHIEF JUSTICE ROBERTS: We'll hear argument

first in case 05-381 Weyerhaeuser Company versus

Ross-Simmons Hardwood Lumber Company.

Mr. Pincus.

ORAL ARGUMENT OF ANDREW J. PINCUS

ON BEHALF OF THE PETITIONER

MR. PINCUS: Thank you, Mr. Chief Justice,

and may it please the Court:

The question in this case is whether the

standards this Court adopted in Brooke Group to

determine whether a seller's prices violate the

antitrust laws because they are too low also should

apply in assessing the claim that the buyer's purchase

prices are illegally high. We submit that the Brooke

Group test applies because the four key underpinnings of

the Court's ruling apply fully here.

First, there's a high risk of mistaking

aggressive competition for anticompetitive behavior.

Increasing the prices that are paid for inputs like

lowering sales prices is a mechanism by which a firm

competes. It's the result that we would expect from a

buyer's ordinary competitive instincts. So the conduct

targeted here is on its face identical to core




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procompetitive conduct. It's also very hard to

distinguish losses suffered by a more inefficient

competitor from hard -- to anticompetitive behavior, but

the antitrust laws --

JUSTICE STEVENS: Can I ask you a

preliminary question before you get too far into your

argument? Is it your understanding that the

instructions to the jury were that finding that

predatory price cutting was in itself sufficient to

establish a Section 2 violation? I know the Court of

Appeals opinion reads that way but is it, do you think

the jury was so instructed?

MR. PINCUS: Yes. Our position is that that

is what the jury was instructed, because the predatory

pricing instruction said one of plaintiff's contentions

is that defendant purchased more logs than needed or

paid a higher price for logs than necessary in order to

prevent the plaintiffs from obtaining the logs they

needed at a fair price. I'm reading from page 14(a) of

the appendix to the petition. And then it concluded, if

you find this to be true, you may regard it as an

anticompetitive act.

JUSTICE STEVENS: You may consider it as an

anticompetitive act, but it does not say you may regard

it as a violation of Section 2.




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MR. PINCUS: No.

JUSTICE STEVENS: And as I read the

instructions, it did require there be three elements of

the violation of Section 2 which, two of which were not

discussed by the Court of Appeals.

MR. PINCUS: Well, Your Honor, there is no,

there is no contention here about monopoly power. The

focus here is on the conduct element of Section 2.

JUSTICE STEVENS: Do you concede there is

monopoly power?

MR. PINCUS: We are not disputing it before

this Court.

JUSTICE STEVENS: But is that relevant to

the question whether, if there is monopoly power plus an

attempt to preserve that power or require that power,

plus an anticompetitive act, is that a violation of

section 2.

MR. PINCUS: Well, Your Honor, our view is

what the Court has said in cases like Trinko, is that

the test is monopoly power and anticompetitive conduct.

Those are the two elements. We are not contesting the

monopoly power element. We are looking at whether there

was anticompetitive conduct here.

JUSTICE STEVENS: But you do agree that the

conduct in itself is not sufficient to establish a




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violation, the question of whether the conduct plus the

monopoly power --

MR. PINCUS: Yes. Because this is a claim

under Section 2, there would have to be either monopoly

power or a danger of probability to the monopoly power.

It's single firm conduct so there would have to be --

JUSTICE STEVENS: And so you're arguing not

only that the pricing conduct was not itself sufficient

to prove a violation, but it also was not even an

anticompetitive act that may give rise to damages?

MR. PINCUS: Yes, Your Honor. We are

arguing both things. I think, I'm not sure that there

is much space between the two, but to the extent there

is, we are arguing both.

JUSTICE STEVENS: Obviously, if there's just

an anticompetitive act without a violation of the

statute, then there would be no basis for damages.

MR. PINCUS: I think that's right, but I

guess the way I think the Court has approached

determining anticompetitive act, anticompetitive

conduct, is it's the kind of conduct when engaged in by

a monopolist or an entity that has a dangerous

probability of cheating it, it is a violation of this

statute.

JUSTICE STEVENS: Of course in the Brooke




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case, it may not have even been a monopolist.

MR. PINCUS: Well, because Brooke involved a

claim under the Patent Act. But this Court in the

Trinko case has certainly interpreted the Brooke

Standard as also applying to claims under Section 2.

And in fact the Court explicitly said that in Brooke

Group.

As I said, the first critical underpinning

is the risk of mistaking aggressive competition for

anticompetitive behavior. Second, this case involves --

CHIEF JUSTICE ROBERTS: Well, it's a little

different here in that in the Brooke Group cases, of

course, the alleged anticompetitive conduct was pricing

too low, which has at least a direct benefit to

consumers either in the short term, certainly in the

short term, and arguably in the long-term as well, while

here that is not the form in which the anticompetitive

conduct, that's not the form the anticompetitive conduct

takes. So isn't that a reason not to think that we

should apply the Brooke Group test to this situation?

MR. PINCUS: Your Honor, we don't, we don't

think that that difference is a distinction that

warrants a different test, for several reasons. First

of all, we are dealing here with single firm pricing

conduct and it's recognized that that's key to the




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proper functioning of the markets. As the court said in

Professional Engineers, fixed pricing is the central

nervous system of the economy. It allocates goods and

ensures that, that they are allocated to the most

efficient use.

Here, although there's no immediate benefit

to consumers, there is an immediate benefit to the

sellers of the logs, who certainly benefit when

competition drives up the prices that they achieve. And

we think that the Sherman Act protects them and gives

them the benefit of full competition just as much as it

does consumers. Over the course --

CHIEF JUSTICE ROBERTS: Have we ever

identified that as a benefit that the antitrust laws try

to achieve, people get higher prices for what they sell?

MR. PINCUS: Yes. In Mandeville Farms,

which was a Section 1 case, the Court did talk about the

fact that the antitrust laws protect sellers as well as

buyers, and that was a case in which there was allegedly

a Section 1 conspiracy to price too low, and the Court

said that's per se unlawful.

CHIEF JUSTICE ROBERTS: So in Brooke Group,

we said it's a benefit when prices are low to consumers,

and in this other case we said it's a benefit when

prices are high to suppliers.




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MR. PINCUS: Because the benefit that I

think the Court is looking at in both cases is not the

particular price levels, but in achieving and ensuring

free price competition because of the central role that

price plays in the economy. That's what the Court is

trying to protect in Professional Real Estate -- in

Professional Engineers --

JUSTICE SCALIA: I assume it's a benefit to

consumers if the supply of the needed goods is increased

because of higher prices being paid for those needed

goods, and I assume when a higher price is paid, more of

those goods will be forthcoming, which will benefit

consumers who want those goods.

MR. PINCUS: That is our second argument,

Justice Scalia.

JUSTICE SOUTER: Well, you don't have that

in this case, do you, because I thought the, I thought

one of the arguments on the other side was the

inelasticity of the supplies, so that no matter what

they were paying, basically the same amount of wood was

ultimately going to get processed; is that correct?

MR. PINCUS: No, Your Honor. The claim is

that the supply was relatively inelastic, not that it's

perfectly inelastic, and as long as the supply market is

not perfectly inelastic, an increase in price may lead




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to more supplies, maybe not as much as if there were

higher elasticity, but more. But there's another

benefit to consumers here, which is that if one would

expect that a buyer bidding more can make a more

efficient use of the product and therefore generate more

output, and that output expansion which doesn't depend

on supply expansion is also beneficial to consumers

because that means there will be more output in the

downstream market and a corresponding decrease in price.

So we have those two benefits to consumers

and we also have the fact that as the Court said in

Professional Engineers, the Sherman Act reflects a

judgment that price competition generally, a free and

open price competition will produce lower prices and

better goods and services, and the Court has not

required that that be traced to consumer welfare in

every particular case.

JUSTICE SCALIA: I presume it could lead to

lower consumer prices too. If you have a firm that has

developed a new, a new technique for processing the

logs, and it can process them cheaper and faster, and

sell them for a lower price but in greater volume, and

thereby make even more profit, that firm would be

willing to pay more for those logs, even though it would

sell them for less than competitors might sell them.

10

Alderson Reporting Company



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MR. PINCUS: That's exactly right, Justice

Scalia, and that's what the record reflects here, that

Weyerhaeuser invested in its lumber mills and created a

process that got more value out of a log. The record

reflects that plaintiffs, for example, did not do that.

And there is testimony that plaintiff's mill was quite,

relatively inefficient compared to Weyerhaeuser.

Weyerhaeuser invested new processes that had less waste,

produced more output as Justice Scalia suggested, and

therefore it was able to sell, sell that output at a

lower price and still make a profit, because it was

getting more output for log and therefore could pay more

for the log.

JUSTICE KENNEDY: Was there any argument in

the trial court or in the briefs of the Court of Appeals

as to how to calculate cost? You basically have two

markets. You don't usually think of cost when you buy

something. But was there any argument as to how to

determine whether or not this was below cost in the

Brooke Group sense?

MR. PINCUS: Well, our view, Justice

Kennedy, there really wasn't, because the district judge

had made clear his view in the pretrial motions that

there wasn't a need to prove prices, and that --

JUSTICE KENNEDY: But that was the end of it

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at the trial court.

MR. PINCUS: But our position is, and there

has certainly been some writing on this in the

literature, is that what one does is take the cost of

producing the output which includes the allegedly

predatory price of the log, and here logs are 75 percent

of the cost so it's a very big cost. Compare those

costs to the revenues that are received in the

downstream market and if those revenues exceed costs,

then you're in a position where the defendant is

behaving perfectly economically rationally. If they're

less, then you go on to recoup it.

JUSTICE GINSBURG: Mr. Pincus, how do you

determine the price of the logs? Because we, the

charges that some logs were purchased at an excessive

price, and if we were dealing with only those logs to

determine cost, that's one thing. But we are, also in

this picture is that some of the logs came from

Weyerhaeuser's own land and some came from long-term

contracts that it had, and those, the price was not

inflated on those. So if you take those into account

you may get one figure, but if you take only the high

bid logs you might get a different picture. So how,

what is it? How do you determine costs? Do you look at

all the logs that were purchased or only the ones that

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were allegedly bid out?

MR. PINCUS: No. You would look, you would

look, Your Honor, at all of the, at all of the logs,

just as in the downstream market if you have a sell side

case, you look at, you look at prices of all sales.

Here it's interesting that the record reflects that

plaintiff received more than, between 30 and 50 percent

of its logs from the same kind of long-term sources that

it argues that Weyerhaeuser received it from. So in

this case there really isn't the kind of disparity, but

our position would be that you add all of those up and

compare them to revenues.

JUSTICE KENNEDY: It's not clear to me that

we have to get into this but if we do, I'm not sure

about your answer to Justice Ginsburg's question. If

you have your own logs that you own already and if you

have logs on a long-term contract, the only relevant

logs are the logs that both people are competing for.

That's the only relevant market that we are talking

about insofar as the purchaser is concerned.

MR. PINCUS: And it might be --

JUSTICE KENNEDY: And if Weyerhaeuser wanted

to drive somebody out of the market, then they go after

the logs which are open to both parties.

MR. PINCUS: And Your Honor, as the Court

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observed in Brooke Group, there really wasn't a need

there to get into how the test works and we think there

isn't here. We think the issue is symmetrical and it

might be that the focus is on the incremental costs that

are associated with the alleged predatory volume, and

therefore that might focus on those incremental costs.

But in this case there's no dispute that, whatever the

measure of costs, there has been no challenge to the

position that Weyerhaeuser's prices were above those

costs.

Let me just turn back to, to the other two

reasons why we think Brooke Group applies because I

think they're important. The third is it's much more

likely that the high bids here were going to, were a

result of legitimate competition than of anticompetitive

effort. As this Court has observed both in Brooke Group

and Matsushita, predatory conduct is self-deterring. To

engage in it, the defendant has to be willing to incur a

near-term loss against the hope of higher returns later.

And as the Court explained in those cases, the loss is

definite but the gain depends on a number of

imponderables. So there is some self-deterring.

And finally, a test that provides no

guidance threatens false positives that will deter the

very competition that our economy requires and that

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helps our economy reach its most efficient state. As

Justice Breyer put it for the First Circuit in Town of

Comfort, antitrust rules must be clear enough for

lawyers to explain them to their clients, especially in

a sensitive area like pricing. And certainly the rule

that the Ninth Circuit adopted here has none of that

clarity and we think that the Court's Brooke Group

decision and that test does.

JUSTICE STEVENS: May I ask this question?

Supposing the evidence was perfectly clear that the

company did engage in a plan to get a total monopoly and

there were minutes of the board of directors says that

in order to do this we've got to drive company X out of

business and so you, we want you to compete in every

transaction with company X that you can and buy the logs

at a higher price. Would that be an anticompetitive act

even if it did not result in loss to the defendant?

MR. PINCUS: And the only anticompetitive

conduct alleged was pricing conduct, Your Honor?

JUSTICE STEVENS: No. The

anticompetitive -- the plan is to drive the company out

of business. And the only anticompetitive conduct other

than proving the whole objective is that you pick on

this one competitor and outbid him every time you can.

Could that possibly give rise to a damage claim?

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MR. PINCUS: No, it wouldn't, Your Honor.

JUSTICE STEVENS: Even if the whole purpose

was to drive it out of business?

MR. PINCUS: Even if that was the whole

purpose.

JUSTICE STEVENS: Pursuant to a plan to

acquire a monopoly.

MR. PINCUS: And the reason for that,

Justice Stevens, is it's very hard to distinguish,

especially for the judicial system to distinguish,

between hard-fought competition and anticompetitive

intent if all we're looking at is what's in people's

mind set. As judge Easterbrook wrote in his AA Poultry

decision --

JUSTICE KENNEDY: Why is it so hard if you

take Justice Stevens' premise that there's an agreement

and we take that as a given, as a given premise?

MR. PINCUS: Well, because there won't be a

given premise in every case, Your Honor, and the problem

is the Court has to write rules that will, that will

govern conduct, primary conduct of business people in

the market, and a rule that says if you can prove intent

then you don't have to worry about prices and costs is a

rule that opens the door to second-guess, judicial

second-guessing of prices --

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JUSTICE STEVENS: No, but only intent plus

monopoly power. You have to be able to prove monopoly

power, too.

MR. PINCUS: You do, Your Honor.

JUSTICE STEVENS: There aren't too many

cases that fit this.

MR. PINCUS: As the Court has recognized in

the section 2 context, the problem of deterring

procompetitive conduct is even more serious because you

don't have the threshold environment of proof of

conspiracy, as one does in section 1. We're dealing

with unilateral conduct, and so --

JUSTICE STEVENS: No, but unilateral conduct

where you have monopoly power. There aren't too many of

these cases, as you know.

MR. PINCUS: Well, Your Honor, market

definition is a complicated issue and it may be hard for

businesses --

JUSTICE STEVENS: It was an issue that was

resolved by the jury in this case and I don't understand

you to be disputing the resolution of that issue.

JUSTICE SCALIA: What do we do in the

correlative situation where there is an allegation of

predatory selling rather than predatory buying if you

had the same situation posed by Justice Stevens? Namely

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evidence that you're trying to drive the competitor out

of business, wouldn't that establish a violation?

MR. PINCUS: It would not establish a

violation, Your Honor. In fact, the Brooke Group Court

dealt with that very case because the dissent in Brooke

Group pointed out that the district court in that case

had held that the intent evidence was amongst the most

powerful that had ever been, been presented in any case,

and it still said, even though there was a clear

evidence of intent --

JUSTICE STEVENS: But that did not involve a

monopoly. That did not involve monopoly power.

MR. PINCUS: But it involved the test for

predatory pricing, Your Honor, under Robinson-Patman.

But the Court said its test was perfectly applicable to

section 2. And the lower courts have certainly applied

that test in just that way in section 2 cases. And if

the rule would be that even in the predatory selling

situation intent can override the price-cost and the

recoupment requirements, then you're in a situation

where there's no ability for business people to know in

advance when low prices are justified. All we think is

that there should be symmetry.

If the Court has no further questions I'll

reserve the balance of my time.

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CHIEF JUSTICE ROBERTS: Thank you,

Mr. Pincus.

Mr. Shanmugam.

ORAL ARGUMENT OF KANNON K. SHANMUGAM

ON BEHALF OF UNITED STATES,

AS AMICUS CURIAE, SUPPORTING PETITIONER

MR. SHANMUGAM: Thank you, Mr. Chief

Justice, and may it please the Court.

Aggressive bidding by the buyer of an input,

no less than aggressive pricecutting by the seller of a

finished product, is usually procompetitive. Because a

claim of predatory bidding is simply the flip side of a

claim of predatory pricing, the Brooke Group standard

for predatory pricing claims should apply to predatory

bidding claims as well. And in our view the court of

appeals erred in this case by sanctioning a broader and

more subjective standard of liability. In Brooke Group,

this Court adopted its now familiar two-pronged standard

for predatory pricing claims despite recognizing that

each prong of that standard might permit some

anticompetitive pricecutting. The court was willing to

tolerate that modest degree of underinclusion because,

in the Court's own words, "The mechanism by which a firm

engages in predatory pricing is the same mechanism by

which a firm stimulates competition, namely by lowering

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its prices. And the Court explained that a broader or a

less precise standard of liability would run the risk of

prohibiting or chilling some procompetitive price

cutting. In our view the same analysis can apply to a

claim of predatory bidding. Because aggressive bidding

is usually procompetitive, application of the Brooke

Group standard is warranted in order to avoid

prohibiting or chilling procompetitive conduct with

regard to price in that context as well.

The court of appeals in this case held that

Brooke Group was inapplicable to respondent's claim of

predatory bidding by --

CHIEF JUSTICE ROBERTS: Would you describe

the hypothetical Justice Stevens posed to your, your

brother, would you describe that as just aggressive

bidding? Aggressive is, you know, it's kind of a good

term when you're talking about competition. But what if

it's purposely bidding higher than you know your rival

can afford?

MR. SHANMUGAM: Well, Mr. Chief Justice, I

understood Justice Stevens' hypothetical, and he can

correct me if I'm wrong, to posit a case in which there

was dynamite evidence that the defendant had a

monopolistic or exclusionary intent. But in our view

that is insufficient to state a section 2 claim. One

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has to have exclusionary conduct as well.

JUSTICE STEVENS: No, you have to have the

monopoly power as well.

MR. SHANMUGAM: Well, that is also true, and

with regard to a claim of attempted --

JUSTICE STEVENS: In your view, if as the

jury was instructed in this case there was proof of

monopoly power and intent to maintain or preserve that

power, plus anticompetitive acts, does the

anticompetitive act have to be in and of itself a

violation of the Sherman Act?

MR. SHANMUGAM: Well, I think you need to

have all three of those elements in order to state a

claim of attempted monopolization --

JUSTICE STEVENS: And if you do have all

three, is that enough to prove a violation?

MR. SHANMUGAM: That would be enough to

state a claim for attempted monopolization under this

Court's decision in Separate Forks.

JUSTICE STEVENS: And isn't that how the

jury was instructed in this case?

MR. SHANMUGAM: In our view the jury was

instructed that it would be sufficient to establish an

anticompetitive act to find that petitioner priced its

logs --

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JUSTICE STEVENS: Yes, but if it was not

instructed it would be sufficient to find a violation of

section 2 by those, by that accounting, is that not

correct?

MR. SHANMUGAM: That is correct, Justice

Stevens, and the jury was also instructed and in our

view the jury was properly instructed with regard to the

other two elements, namely a dangerous probability of

monopolization and a specific intent to monopolize. The

sole question before this Court is what constitutes

exclusionary conduct for purposes of section 2, what

constitutes it regardless of whether it's a claim of

attempted monopolization or actual monopolization.

JUSTICE STEVENS: Go back to my

hypothetical. Supposing you have the first two elements

and you say in order to drive this company out of

business we want you to compete with them and get the

logs at whatever cost it takes. Would that be an

anticompetitive act?

MR. SHANMUGAM: No, Justice Stevens. That

would solely be --

JUSTICE STEVENS: Even if it was for the

sole purpose of driving the company out of business in

order to accomplish the goal of getting a monopoly?

MR. SHANMUGAM: That would be evidence, and

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it may be powerful evidence, of a monopolistic intent,

though courts have noted that even with regard to that

requirement it's famously difficult to distinguish

between a legitimate competitive attempt on the one hand

and an illegitimate monopolistic intent.

JUSTICE STEVENS: No, no. I'm assuming this

is not evidence of intent. There's independent evidence

of both intent and monopoly power. With those two

elements established, would this, the kind of evidence I

described, be evidence of an injury to the plaintiff

that could be actual in damages?

MR. SHANMUGAM: No, Justice Stevens. You

would need to have objective evidence that the defendant

met both of the prongs of the Brooke Group requirement.

JUSTICE STEVENS: Will you need to meet the

prongs of the Brooker test even if you otherwise prove a

violation of section 2?

MR. SHANMUGAM: Well, I'm not quite sure

what it means to say that you otherwise prove a

violation in that example.

JUSTICE STEVENS: You prove monopoly power

plus an intent to maintain or acquire it.

MR. SHANMUGAM: That is insufficient. You

have to have some action --

JUSTICE STEVENS: That's insufficient to

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prove a violation of Section 2?

MR. SHANMUGAM: It is insufficient to prove

a violation of section 2 because you have to have some

conduct that is classed as exclusionary, and in our view

that is the content that the Brooke Group standard

supplies. It specifies the conduct that you need to

have and that conduct is the defendant suffering a loss

in the short term and having a dangerous probability of

recouping that loss in the long term.

JUSTICE SCALIA: I assume you could have a

company that has a dynamite evidence of seeking to

monopolize and the means that they choose is just

idiotic. For example, they say, we're going to try to

get a monopoly by buying these logs at a lower price as,

at as low a price as possible. You would have the two

elements, monopoly power, intent to monopolize, but you

wouldn't have an act that constitutes anticompetitive

conduct.

MR. SHANMUGAM: Justice Scalia --

JUSTICE SCALIA: And that's what you're

asserting is the case here.

MR. SHANMUGAM: You could have an

incompetent monopolist more generally or an incompetent

predator in this specific context. And I think that the

only other thing I would say with regard to this

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colloquy is that the Court really did confront this

issue in Brooke Group. There was fairly strong evidence

of monopolistic intent and the majority opinion --

JUSTICE STEVENS: But there is no evidence

of monopoly power and it isn't even remotely at issue in

that case.

MR. SHANMUGAM: That's right, and it wasn't

an issue simply because it was a Robinson-Patman Act

case and all that is required under the Robinson-Patman

Act is the possibility of harm to competition and there

was some disagreement about whether a showing had been

made of that requisite possibility between the majority

opinion and your dissenting opinion. But I don't think

that there was any disagreement in Brooke Group with

regard to the relevant standard for exclusionary

conduct. Even the dissenting opinion recognized that

recoupment would be necessary in order to state the

predatory pricing claim in the Robinson-Patman Act

context.

JUSTICE ALITO: Would your answer be the

same if you added to Justice Stevens' hypothetical very

high barriers of entry that would prevent other

competitors from entering the market after the target

was driven out?

MR. SHANMUGAM: High barriers to entry,

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Justice Alito, would be very relevant to the inquiry

under the second prong of the Brooke Group standard,

namely whether the defendant had a dangerous probability

of recoupment in the long term. And indeed in many

predation cases, many predatory pricing cases in the 13

years since Brooke Group, barriers to entry have been

absolutely vital in resolving predatory pricing claims

at the summary judgment stage, because typically

defendants will make the argument that the absence of

barriers to entry make the possibility of recoupment

unlikely. But that is a consideration that is built

into the Brooke Group standard and it certainly would be

part of the Brooke Group analysis in the predatory

bidding context as well.

I want to say just one thing in response to

Justice Ginsburg and Justice Kennedy's questions to my

friend Mr. Pincus about the question of the appropriate

measure of cost if Brooke Group were to apply to

predatory bidding claims. As in Brooke Group itself, we

believe that it is unnecessary for this Court to specify

the exact method of calculating costs in this case. But

the position of the United States more generally both in

the predatory pricing context and in the predatory

bidding context is that a Court should look to a

defendant's incremental costs, and in this context that

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would mean looking to the amount of the input that was

the subject of the alleged predation. So in this case

the amount of logs that petitioner allegedly predatorily

purchased on the open market. And such an incremental

approach to be sure is not within its difficulties in

application and for that reason a number of lower courts

in the predatory pricing context have instead looked to

average variable costs or other measures as a proxy for

incremental costs. But we believe that in a case such

as this one, looking to incremental costs may be useful

because it effectively excludes from the analysis any

potential cross-subsidization, whether by virtue of the

fact that in this case, for example, petitioner may have

harvested logs from its own lands. There are claims in

this case that petitioner entered into various exclusive

dealing arrangements as well, obtained logs at a lower

price on that basis. And an incremental approach has

the virtue of focusing only on that portion of the

market that is the subject of the alleged predation

claims.

JUSTICE SOUTER: You also, I take it, have

to have an equally limited approach on the recoupment

analysis, then. I mean, your recoupment analysis would

have to be symmetrical with your cost analysis.

MR. SHANMUGAM: Yes. That's absolutely

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true, Justice Souter, and again this is an issue that

the lower courts have been grappling with in the

predatory pricing context, and I by no means want to

suggest that it is always an easy analysis in the

predatory pricing context. Professor Arita's treatise

has hundreds of pages on the appropriate calculation of

cost, but I think that the important thing to remember

with regard to the below cost pricing prong of the

Brooke Group analysis is that it does provide an

objective yardstick by which a defendant's loss can be

measured.

Thank you.


Mr. Shanmugam.

Mr. Haglund.

ORAL ARGUMENT OF MICHAEL E. HAGLUND

ON BEHALF OF RESPONDENT

MR. HAGLUND: Mr. Chief Justice, and may it

please The Court.

In this Court's antitrust jurisprudence over

the last 25 years, market realities have consistently

trumped per se rules. The same approach should apply

here. Brooke Group's per se rule which carved out a

special exception to the standard rule of reason

balancing test in Section 2 cases should not be extended

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to the buy side. No safe harbor per se rule is

justified here because raising input prices, unlike

cutting output prices, is moving prices in the wrong

direction for consumers.

JUSTICE BREYER: But even it does hurt the

suppliers and the antitrust laws are just as, I don't

know just as, but they are just as concerned about a

group of small farmers or a group of small growers or a

group of small fishermen faced with a monopsony buyer as

they are with a group of consumers having to fight off a

monopoly seller.

MR. HAGLUND: Justice Breyer --

JUSTICE BREYER: I mean that's pretty well

established, isn't it?

MR. HAGLUND: Well I'd like to point out

that the Mandeville Farms case that Mr. Pincus cited

does not stand for the same --

JUSTICE BREYER: No, no, Congress has

actually passed special legislation that the Mandeville

Farms is consistent with the Farmers Cooperative and so

-- you want me to write the proposition that the

antitrust laws are not concerned --

MR. HAGLUND: Oh, absolutely --

JUSTICE BREYER: -- with the monopoly buyer

who would in fact exploit a group of small suppliers,

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farmers?

MR. HAGLUND: Absolutely not.

JUSTICE BREYER: Okay.

MR. HAGLUND: But in this particular context

which the Ninth Circuit repeatedly emphasized, in an

inelastic market like this one raising input prices is

not going to increase supply and --

JUSTICE BREYER: That can't possibly be

right, can it? I mean if in fact the object here is to

strike, is -- suppose their object is what you say.

Their object is in fact to try to get a monopoly on the

buying side over a group of small woodsmen. And they

might do that if they drove out all the buying

competitors, and now what are they going to try to do?

What they will try to do if they get that terrible

monopoly, which would be bad --

MR. HAGLUND: Drive prices down.

JUSTICE BREYER: Right. Drive prices way

down, below what the woodsmen could get for them. And

if that's going to have any effect aside from an income

effect, it will leave some of them to go to the bread

line or go to other places where they have other jobs at

lesser revenue than they would get by staying in the

woods business and selling at a reasonable price. That

would be an antitrust concern.

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MR. HAGLUND: Absolutely, and that is

exactly what Weyerhaeuser's plan was here, as shown by

their own materials, that their plan was and in fact

they did foresee and project that log prices would go

down in 2001 --

JUSTICE BREYER: So where we are is at the

problem. The problem is the same as at the buying side.

What we have is possibly a very bad motive and very bad

effects. On the other hand, low prices are good for the

consumer.

MR. HAGLUND: But you're not --

JUSTICE BREYER: Here we have bad effects,

bad possibilities. On the other hand, higher prices are

good for the woodsmen. So we need rules to separate the

sheep from the goats. And the other side is proposing a

rule, and the rule simply is don't count this as bad

conduct, unless the person who pays the money for the

goods is in fact buying so many goods that later on when

he tries to sell them he will incur a loss.

Now I would have thought for 40 years that

was a traditional idea. If you're trying to decide

whether people are hogging goods unnecessarily for bad

purposes, or rather storing up nuts for winter for good

purposes, then a very good key to that is do these

people expect in the long run to make money out of this

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without driving those victims out? If the answer is

yes; they can make money on the market, they are storing

up nuts for winter. It's good. And if the answer is no

it's bad. That's called the recoupment test. I don't

think that's new. I think it's old. And I'm not sure

what your view of it is.

MR. HAGLUND: Well, as to Brooke Group and

what the Court's being asked to do here, Justice Breyer,

is to go down the same path that it did in Albrecht

versus Harold Company in '68 when it agreed to treat

completely symmetrically minimum and maximum vertical

resale price restraints.

Later on, in State Oil Company vs. Kahn the

Court abandoned and accepted Justice Harlan's dissent

that it was wrong to equate those two.

JUSTICE BREYER: -- I agree with you. But I

don't still think you can defend this retail versus

maximum price restraint. That's a whole another kettle

of fish. And what I'm interested -- I guess my

question particularly is, I propose one test not two,

but it might be that my test encompasses the dollar test

and incremental costs and so forth. What do you think

of my one test?

MR. HAGLUND: Well --

JUSTICE BREYER: One test is if they are not

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going to make money legitimately out of this in the long

run, it's bad, unless they can explain it away. But if

they are, it's okay.

MR. HAGLUND: The problem with granting a

safe harbor for above cost input purchases is that it

does not work well in this context, especially in an

inelastic market. The suggestion that you can simply

use incremental cost is not a workable approach here if

you look at the facts in this case.

CHIEF JUSTICE ROBERTS: What about the fact

that the woodsmen in Justice Breyer's story are rational

actors as well, and they don't have to be geniuses to

realize that they are in a better shape having two

buyers rather than just one. So maybe they forego the

extra 50 cents a log, or whatever -- tree, it is in the

short term and sell enough to keep the other company in

business? I mean they can make that decision

themselves. Or they can make the decision as rational

actors that they are better off having more money that

they can then use to buy more alder saplings that they

can plant for the future. And either way it benefits

the consumers.

MR. HAGLUND: Well not, that's not quite

correct, because the signals that the higher input

prices show, yes, they do generally incent more

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production in a, in a typical market. Here, however,

where you have a product that takes 30 to 50 years time

and production, the price, higher price signals when

they are sent by a monopsonist, like Weyerhaeuser in

this case, actually send a very powerful message to tree

farmers not to replant alder, despite those high prices.

And there was evidence in the follow-on cases that

reference that.

It was alleged in our complaint in this case

but not actually backed up by any testimony at trial,

that tree farmers in Oregon and Washington were actually

electing not to replant alder and as Professor Noel

notes in his law review article in the issue of the

Antitrust Law Journal, which by the way is the only area

-- half of this issue is devoted to this subject. It's

the sum total of literature devoted to predatory

overbidding in this area. And what Professor Noel notes

is that where you have localized monopsony, the result

is when the monopsony is in full flower a misallocation

of resources between regions. The highly productive

forest lands of the Pacific Northwest won't have as much

alder in the future because of the significant signals

sent by a monopsonist, even when they are engaged in

that scheme.

The seller is happy if he has mature alder

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to sell at that time to get the good price, but he is

not going to replant, because he sees that 30 years down

the road he will not have a competitive marketplace

within which to sell his timber, and that was the

reality in this case.

CHIEF JUSTICE ROBERTS: Well if he is, if he

is that rational and foresighted, why isn't he rational

and foresighted enough to know that he ought to be

selling some to the other, the other processor even if

that processor is not bidding as much?

MR. HAGLUND: Well we did actually have some

record evidence in this case that at least a few people

were doing that. One of the major suppliers of the

respondent here, Ross-Simmons, was a company called

Longview Fiber which made it -- a very sophisticated

publicly held company -- made it a practice to sell most

of its volume to Ross-Simmons on a market basis because

it did not want the eventuality of not having

Ross-Simmons in that competitive circle with

Weyerhaeuser.

Most small woodland owners, however, who may

only be in the market once every five years because

that's the nature of their rotation, of the age classes

of the timber that they have got, are not in that kind

of sophisticated position because they are in the market

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so infrequently to make that kind of a judgment. It's

been --

JUSTICE ALITO: If we don't take the Brooke

Group approach, is the alternative to ask the jury to do

what the instructions in this case ask them to do.

MR. HAGLUND: No, it's not.

JUSTICE ALITO: To decide whether

Weyerhaeuser bought more logs than it needed in order to

prevent its rivals from obtaining the logs that they

needed at a fair price? How is a jury to, a lay jury,

to decide whether a company like Weyerhaeuser bought

more logs than it needed, or what is the fair price?

MR. HAGLUND: We don't contend that the

instruction was perfect here, but if one looks at the

instruction as a whole and --

JUSTICE ALITO: But you think it was

sufficient.

MR. HAGLUND: Pardon me?

JUSTICE ALITO: You think it was sufficient

enough.

MR. HAGLUND: In this case it was legally

sufficient and I point out that this Court very recently

has issued a decision in the first case of the term,

Ayers vs. Belmontes, where you looked at the question of

the catch-all mitigation factor in California in the

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penalty phase of a capital murder case. And you looked

at the instruction and interpreted it in terms of the

closing arguments, the evidence and the other

instructions as a whole.

JUSTICE GINSBURG: Who proposed the

instruction in this case?

MR. HAGLUND: The instruction, the paragraph

that is subject to the great criticism on the other

side, was a paragraph that was drafted by the district

judge and handed out near the end of the trial and then

commented on by the lawyers in, prior to --

JUSTICE GINSBURG: There was no requested

charge on this point by the plaintiff?

MR. HAGLUND: That's -- as to the issue of

predatory pricing, plaintiffs, as we make clear in our

brief, actually submitted a predatory pricing

instruction three weeks before the trial. You tend to

be overinclusive pretrial. Defendant on the other hand

surprisingly submitted no such instruction on predatory

pricing. The judge submitted a paragraph that had

something more than what the current, or the ultimate

paragraph contained. There was a debate over whether it

needed to be, whether it was consistent with Brooke

Group. I agreed with the other side that it did not

have both components of the Brooke Group test. Judge

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Panner and I had a colloquy where ultimately he was

going to turn one paragraph into two, include a Brooke

Group test. We then withdrew our request for that

instruction, Weyerhaeuser objected to the, the thinned

down version of the ultimate paragraph.

But the interesting thing about

Weyerhaeuser's relationship to this instruction is that

they really invited the linguistic framework of this,

"bought more than they needed" or --

JUSTICE ALITO: What does that mean? What

does a fair price in this, in this context mean? Does

it mean the price that's necessary in order to keep an

inefficient competitor in business?

MR. HAGLUND: Well, what it meant in this

case, Justice Alito, is that it meant what, how much did

Weyerhaeuser artificially increase the log market above

where it otherwise would have been? We had several

experts and a number of both industry and forest

economists testify that for 20-plus years log prices had

been following lumber. There was an equilibrium in the

market. Then you get to --

JUSTICE SOUTER: Why is that the standard of

fairness? I mean that, you know, that may be fine. But

how does, how does a jury, A, what's the authority for

saying that is the standard of fairness and B, how does

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a jury know that?

MR. HAGLUND: The -- if you look at the

Ninth Circuit opinion, the Ninth Circuit made it clear

that the instructions as a whole provided sufficient

guidance. Nowhere in the case as we tried it did we

attempt to exploit the instruction in the way that

Weyerhaeuser suggests happened.

JUSTICE SOUTER: Maybe you didn't, but that

basically left the jury on a, on a free float, didn't

it?

MR. HAGLUND: Well, I don't think so if you

look at the evidence. The evidence that we presented

included a forest economist who presented three

different scenarios where he identified how much

Weyerhaeuser had artificially increased log prices above

where they would have been but for their anticompetitive

behavior. We in no way went to the jury in closing,

saying award what you think is fair. We relied

completely on that evidence, and in fact the jury, which

included a Ph.D. in physics in a high-tech industry, an

accountant, the head of a chain store, and a banker and

a retired farmer, they looked at the evidence and they

actually to the dollar picked one of those market -based

scenarios for how much was the market elevated.

JUSTICE SOUTER: Okay. Let's assume I

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accept your sort of Delmonte's analysis here. If we

were to approve of that instruction in effect, as you

want us to do, and we also believe that on its face

something more has got to be said than merely the word

fair, what proposition would we say must be included in

that instruction to make the so-called fairness

instruction a sensible one that can be consistently

applied?

MR. HAGLUND: And we don't contend that it

was a perfect instruction. We think it would be

perfectly appropriate if --

JUSTICE SOUTER: No, I realize that.

MR. HAGLUND: Okay.

JUSTICE SOUTER: And I'm saying if we follow

your lead, we're going to try to take that and make it a

closer to perfect instruction, and what should we say

must be added to it?

MR. HAGLUND: It's quite simple. If you

look at that paragraph, there are two pieces of it. One

of them, one portion says that you can regard it as an

anticompetitive act if defendant purchased more logs

than it needed. We don't think that needs to be

improved because that's easy to figure out, and here we

had evidence that they continued --

JUSTICE GINSBURG: Why? Why is it easy to

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figure out? As Justice Breyer brought up the

stockpiling, how do you know whether they are storing

it, or a time when the supply is short, or they are just

letting it go to rack and moon in order to put this

company out of business?

MR. HAGLUND: Justice Ginsburg, you will

know because of the evidence in the case. If the

plaintiff, the defendant is able to show that they were

storing up this extra input against a prospect of a

price hike in the future or because they were out trying

to get enough volume for some promotion for a customer

that was going to significantly increase their

purchases, then you'd have a different kind of case. We

have a situation where they warehoused large,

unprecedentedly high volumes of lumber because they --

JUSTICE BREYER: Why did they say they

needed it? I mean, why do you need all this Ph.D. guy

up there? Why don't you just prove what you just said?

MR. HAGLUND: We did.

JUSTICE BREYER: Fine. Then why do you need

all these other instructions about pricing? I suppose

the only reason you'd need them is if there's a dispute

as to whether it was in their economic interest in the

absence of any intent to monopolize these people to buy

all these logs or not. And so it would be very

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interesting if you have a way of proving that they did

not need these for any legitimate purpose, a matter

which is likely to be disputed. So, I think the hard

thing in these cases is to prove that. And if you can

tell me how you prove that without giving the jury an

instruction something like, look to see whether they can

sell them reasonably at a profit. Or, look to see even

if they can't sell them at a profit, whether they could

recoup whatever they are losing later. Or, or, and you

fill in some blanks, and now I'll have some candidates

for testing.

MR. HAGLUND: Well, as to the paid a higher

price than necessary, the language we would suggest

could be used in another case and passed on by this

Court, is the following: Paid a higher price than

necessary to move the log market to higher levels than

otherwise would have prevailed in order to injure

competition.

JUSTICE BREYER: Oh. But of course, I want

to injure competition always when I in fact sell at a

lower price that I very much hope my competitor can't

possibly meet, indeed would go out of business. I

cheer. I would love to get a monopoly. I would love to

make a better product, lower prices, et cetera. Do you

see the problem? And so what you've told the jury there

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on that instruction --

MR. HAGLUND: But here --

JUSTICE BREYER: -- is that they can find

this person guilty even if all he wants to do is so

second-guess that market that he gets the logs and will

sell them at a huge profit later on in a competitive

selling market.

MR. HAGLUND: We don't have a situation

here, Justice Breyer, where Weyerhaeuser presented

evidence that they were the most efficient and able to

pay higher prices. Weyerhaeuser presented no

quantitative evidence that it was the lowest cost

producer in terms of costs --

JUSTICE BREYER: What if it were the highest

cost producer? Suppose still, they think that by buying

these logs we later can make a profit when we resell

them on the competitive market. You see, the reason

they're coming up with this test is they don't think you

can give, the reasoning of it is that they don't think

that you can produce a better one. So I'm listening.

MR. HAGLUND: Well, one of the reasons that

one can't go in this direction here, Brooke Group was a

pricing only case. As the briefs make clear and the

decision made clear, if that had been a standard

monopolization case it would have been out the door on

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summary judgment because the defendant was a 12 percent

player. They had no prospect of, of attempted or

monopolization, a viable monopolization claim. Here we

have a situation where Weyerhaeuser's pricing conduct,

deliberately and artificially pushing the market up

through a variety of mechanisms, was also interconnected

and linked to complementary other conduct that we think

set the table for the effectiveness of their strategy in

elevating the log market that our client was

participating in.

Bear in mind that, that at JA 901 we have a

Weyerhaeuser document showing that very significant

foreclosure from their exclusive contracts in the, in

Oregon for example, this is a document that shows that

62 percent of the market was covered through either

exclusive purchase arrangements between Weyerhaeuser and

large landowners, or non-efficiency-based trades were

the, were linked to the exchange of the alder sawlogs

from that landowner. Only 33 percent according to JA

901 show, in Oregon, was projected to be open market

bidding. Weyerhaeuser acquired, when it was then at a

65 percent market share, acquired the dominant seller, a

built-in monopsony in British Columbia and it's five, 15

to 20-year exclusive forest licenses. That kind of

foreclosure, linked with the anticompetitive behavior

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they engaged in that was a variety of bidding practices,

some of it was overbuying, some of it was manipulating

bidding back and forth, and then putting the last bid in

terms of that cost on the other side.

I think it's important, I'd like to shift to

the instruction again, and make the point that

Weyerhaeuser never gave either the plaintiff in this

case or the district judge the opportunity to consider a

different instruction than was given here. And the fact

that's demonstratively shown if one looks at page 43 of

their opening brief in the Ninth Circuit, in the Ninth

Circuit they only took the position in the bulk of their

brief that they were entitled to judgment as a matter of

law on the basis of Brooke Group. As to the ground or

the contention --

JUSTICE GINSBURG: Do you -- do you agree

that you couldn't have made it on Brooke Group because

they were selling these logs at a profit?

MR. HAGLUND: I didn't quite hear that,

Justice Ginsburg.

JUSTICE GINSBURG: Do you agree that you

could not have prevailed under the Brooke Group test

because Weyerhaeuser was, was making a profit on these

sales even though it had bid up the price of the logs?

MR. HAGLUND: We do not agree as to the

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evidence in this case. We have evidence in this case

that we cited to in our brief that when you adjust, as

against the Longview mill which our client was literally

right next door to, when you adjust for the fact that

Weyerhaeuser supplied half of the raw material needs of

the Longview mill at way below market transfer prices,

when you adjust those to the average price they paid

other third parties for logs, the Longview mill ran at a

loss for a significant part of the, of the predation

period. We do have the evidence in this case to

contend --

JUSTICE SCALIA: It's ultimately a jury

question, I assume.

MR. HAGLUND: If Brooke Group is applied --

JUSTICE SCALIA: But that question was not

put to the jury, right?

MR. HAGLUND: That's correct. We withdrew

the request for a Brooke Group instruction.

But to finish my point about the fact that

this --

CHIEF JUSTICE ROBERTS: So then, would you

be entitled to a remand on that or not, given that you

withdrew that instruction?

MR. HAGLUND: If the Court concludes the

Brooke Group applies to this case, then the instruction

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was incomplete, it was not correct, and we would be

entitled to a remand and a chance to retry the case.

JUSTICE ALITO: But what about the

recoupment prong, given that Weyerhaeuser doesn't have

market power in the selling market and that mills were

entering, new mills were coming on line during this

period. How would you satisfy the recoupment?

MR. HAGLUND: Well, the recoupment is not in

the output end of things. The recoupment is the

opportunity to drive log costs down to recoup the extra

costs you pay during the predatory period. And we had

evidence in the record that a former executive from

Weyerhaeuser testified that they had used this strategy

multiple times, that when it was questioned by some in

top management that the head of a division would always

say once we either acquire or get rid of a competitor,

we will recoup those costs many fold. That's at JA 260,

Cliff Chulos. We also had at JA 903 a planning document

in 2001 where Weyerhaeuser was showing in that

PowerPoint chart the expectation that log prices would

be going down in '01, '02, '03, and for every 2 percent

change downward it was an extra $2 million in profits to

the bottom line. There was no plan to pass on the

benefits of those lower input prices to consumers.

Obvious consumer lack of benefit in that situation.

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Also as to recoupment, if you look at JA 831

to 95, which are the year-end financials for the

Weyerhaeuser alder mills in Oregon, Washington and BC

during a roughly four-year period, you see a monu -- a

huge price differential between the prices in British

Columbia and those prevailing in Oregon and Washington.

We think there was every expectation on management's

part to drive the prices down to the levels that

prevailed in British Columbia, which works out to about

$40 million a year, way way above the amount they were

spending in this predatory scheme predominantly in

Oregon and Washington, because there is no competition

in British Columbia.

But I would like to point out that they

never preserved the issue of whether or not the standard

that the Ninth Circuit in dictum stated was as a whole

sufficient to guide the jury as to a definition of

anticompetitive conduct. At page 43 of their brief

after quoting this paragraph they so criticize, they

note, although that statement of the law -- this is 43

of the Ninth Circuit brief, not the blue brief that you

have -- although that statement of the law may have been

acceptable when Reed Brothers was decided, it is not in

the wake of Brooke Group for reasons explained above.

The point here is that they never made any charge in the

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JUSTICE SOUTER: And so I mean, I think,

they may not have made that an independent basis of

reversal but we've got to consider it.

MR. HAGLUND: I agree with that, but I would

like to point out these facts in terms of the way they

contributed to it. They submitted jury instructions

just like us based upon the ABA model instructions,

theirs are at JA 97 to 122, that used the words outside

of this paragraph that we are talking about, fair,

reasonable or necessary 18 times. They showed up 19

times in those instructions. In their opening and

closing --

JUSTICE SOUTER: I'll stipulate to that.

MR. HAGLUND: Right.

JUSTICE SOUTER: Assuming they don't have a

leg to stand on in complaint, we have still got to face

what the alternative to a Brooke Group kind of

instruction is. And -- and however they may have tried

their case, we've still got the same problem.

MR. HAGLUND: That's correct. And I suggest

that you look to the type of formulation I gave a little

earlier where you're looking at how much did the

defendant push the market to levels that are above where

it otherwise would have been. It's not too far from the

test that is proposed by the State at page 29 of their

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brief where they suggest it's, that the conduct be

measured by whether it raised the price that the buyer's

rivals had to pay for the input beyond a level that

could be justified or explained by other market or

exogenous factors and substantially affected the ability

of the buyer's rivals to compete for the input. The

eight States, all of which have concerns both as sellers

into these vulnerable resource markets and for citizens

and companies in their own resource State, laden States,

whether it's mineral, whether it's agriculture, they

have that concern and they've offered that test that's

not too far from what I posited as a way to improve the

instruction that Weyerhaeuser invited.

I'd like to make one further point on

that subject and that is, if you look at the opening

statement of their counsel, the closing, he used that

very language. They were going to put on witnesses who

would all state that they never bought more than they

needed, they never paid more than necessary. That same

litany was put to 13 different witnesses.

Thank you.


Mr. Haglund.

Mr. Pincus, you have two minutes remaining.

REBUTTAL ARGUMENT OF ANDREW J. PINCUS

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ON BEHALF OF PETITIONER

MR. PINCUS: Thank you, Mr. Chief Justice.

Just a couple of points.

With respect to the story of how this

instruction came to be, in fact it closely resembles

some language that was requested by respondent that

appears on page 93A of the joint appendix which refers

to a test that paying a price for logs with higher than

market value unnecessarily to drive out or injure

competition. So I do think that this is an instruction

that comes from respondent.

It's true that we did not request a Brooke

Group instruction because the district court had ruled

that Brooke Group didn't apply at the summary judgment

phase. We did object to the instruction proposed by the

district judge on the grounds that it did not conform

with Brooke Group in order to preserve our argument here

and we believe that that objection gives the Court the

power to adopt an intermediate rule, but it isn't

exactly what we requested and there are decisions in the

court of appeals of to that effect.

With respect to the question about

purchasing more logs than they needed, as we say in our

briefs we think that that claim can't really be

separated from the predatory pricing claim here because

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the argument is that by purchasing more logs the price

was driven up and it's the increased price, that's the

impact that respondent complains of. So creating a

separate overbuying claim that relies on price for

impact would be the same thing as saying on the sell

side you can have an overselling claim regardless of

whether you flunk the Brooke Group standard with respect

to prices, and that's just going to undercut the

certainty that this Court has prescribed.

With respect to the document that

Mr. Haglund cited, 901A about the inputs, that document

is described in testimony in the joint appendix at 571A

to 573A, and that's a hypothetical look at what the

market might would look like if current, past purchasing

patterns had continued. It's not a document that in any

way says that the various sources of log supply were

locked up and it doesn't indicate that, and in fact

there's nothing in the record to indicate what the

percentage of logs were that were available to

Weyerhaeuser by long-term contract, in contrast, as I

said, to the testimony in the record that indicates that

respondent got between 30 and 50 percent of its logs

through those long-term sources.

With respect to the proper disposition of

the case, in the Boyle case this Court made clear that

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where there's no, not sufficient evidence in the

record -- I'm sorry, my time is up.

CHIEF JUSTICE ROBERTS: You can finish your

sentence.

MR. PINCUS: Where there's not sufficient

evidence in the record to go to the jury under the

proper jury instruction, the proper outcome is for the

claim to be dropped from the case.


Mr. Pincus. The case is submitted.

(Whereupon, at 11:03 a.m., the case in the

above-entitled matter was submitted.)

54





A AA 16:13ABA 50:7abandoned

32:14ability 18:21

51:5able 11:10 17:2

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1:12 54:12absence 26:9

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27:25 29:2330:2 31:1

accept 40:1acceptable

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22:24account 12:21accountant

39:21accounting 22:3achieve 8:9,15

achieving 9:3acquire 16:723:22 47:16acquired 44:21

44:22act 4:22,24 5:16

6:10,16,20 7:38:10 10:1215:16 21:10,1121:24 22:1924:17 25:8,1025:18 40:21action 23:24actors 33:12,19acts 21:9actual 22:13

23:11add 13:11added 25:21

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15:6 19:18advance 18:22

afford 20:19age 35:23aggressive 3:20

7:9 19:9,1020:5,15,16agree 5:24 32:16

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37:24agreement

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34:12,22,2544:18 48:3Alito 25:20 26:1

36:3,7,16,1938:10,15 47:3allegation 17:23alleged 7:13

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answer 13:1525:20 32:1,3anticompetitive

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bottom 47:23bought 36:8,11

38:9 51:18Boyle 53:25bread 30:21Breyer 15:2

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10:25 25:2330:14complains 53:3





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45:15contentions 4:15contesting 5:21

context 17:820:9 24:2425:19 26:14,2326:24,25 27:728:3,5 30:433:6 38:11continued 40:24

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44:13contrast 53:20contributed

49:7 50:6Cooperative

29:20core 3:25correct 9:21

20:22 22:4,533:24 46:1747:1 50:20correlative

17:23corresponding

10:9cost 11:16,17,19

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criticism 37:8criticize 48:19cross-subsidiz...

27:12curiae 1:20 2:8

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6:17 23:11danger 6:5dangerous 6:22

22:8 24:8 26:3dealing 7:24

12:16 17:1127:16dealt 18:5

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8831 48:1

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us supreme court: 05-381

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