The U.S. Supreme Court is seeking the Bush administration's advice on Weyerhaeuser's appeal of a $78.8 million antitrust award for driving...
The U.S. Supreme Court is seeking the Bush administration’s advice on Weyerhaeuser’s appeal of a $78.8 million antitrust award for driving a competing lumber producer out of business.
Federal Way-based Weyerhaeuser, the world’s biggest forest-products company, is fighting allegations that it monopolized the Pacific Northwest market for finished alder, a wood used in furniture, by overbidding for scarce hardwood logs. The 9th U.S. Circuit Court of Appeals upheld a jury award to Ross-Simmons Hardwood Lumber of Longview.
U.S. companies and corporate trade groups say the lower court ruling would set a dangerous precedent, opening companies to suits when they aggressively bid for raw materials and other supplies.
Dow Chemical, Verizon Communications and Microsoft are among the companies backing Weyerhaeuser’s appeal to the high court.
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The lower court ruling “will wreak havoc with the most basic purchasing decisions throughout the country,” according to a brief filed by Coca-Cola and three other businesses.
The court directed its request to U.S. Solicitor General Paul Clement, the administration’s top litigator. If ultimately granted review, the case would add to a very heavy load of antitrust cases before the high court, which already has three scheduled for decision by July.
The award in the Ross-Simmons case would be the largest so far in a set of suits against Weyerhaeuser over its finished alder business. The company has paid $62 million to resolve some of those claims, according to regulatory filings.
In addition, Weyerhaeuser is fighting a $16 million award to rival Washington Alder of Mount Vernon and a class-action lawsuit filed on behalf of purchasers of finished alder.
Ross-Simmons, which went out of business in 2001, accuses Weyerhaeuser of artificially increasing alder prices to deprive smaller competitors of needed supplies. Specifically, Weyerhaeuser paid higher-than-market prices for the wood, bought more than it needed, entered into exclusive agreements with suppliers and illegally bought logs from state forests, Ross-Simmons says.
A Portland jury in 2003 said Ross-Simmons was entitled to compensation of more than $26 million, an amount tripled under federal antitrust rules.
The San Francisco-based 9th Circuit, voting 3-0, said that “when viewed in its entirety, the evidence sufficiently supports a finding of specific intent to control prices and eliminate competition.”
In its appeal, Weyerhaeuser says the 9th Circuit was wrong to approve a jury instruction that focused on whether the company bought more logs than it “needed” and paid a “fair price.” The company said the standard was like “throwing a marshmallow at a jury,” borrowing a phrase first used by federal appeals-court Judge Frank Easterbrook.
“Under the 9th Circuit’s wholly subjective rule, it is impossible for businesses to know what pricing decisions conform with the law,” Weyerhaeuser argued. “Firms accordingly will be forced to curb aggressive, and desirable, competitive bidding for fear of triggering unwarranted liability.”
Weyerhaeuser says the 9th Circuit should have applied a legal standard the Supreme Court used in a 1993 predatory-pricing case. That case required proof that an antitrust defendant sold a product below cost and was likely to recoup its losses after rivals had been driven out.
Ross-Simmons urged the Supreme Court not to get involved, saying the 1993 ruling wasn’t applicable because the Weyerhaeuser case involved overpayments for raw materials, not predatory price cuts.
“Weyerhaeuser’s conduct, raising the costs of natural-resource inputs needed for production, is materially different from lowering the price of goods sold to consumers,” Ross- Simmons argued.
Information from Blomberg News reporter Joel Rosenblatt is included in this report.