Skip to main content

Predatory bidding

What is predatory bidding: the dominant firm submits high bids to buy up supply and prevent competitors from accessing inputs. Once competitors have been disciplined to not submit bids, dominant firm submits low bids to get inputs for cheap.

Test for predatory bidding (Weyerhaeuser): this is the same test as for predatory pricing (Brooke Group). Under Section 2, a plaintiff must prove:

  1. Power: monopsony power in (a) a product (input) market AND (b) geographic market
  2. Conduct: (a) below cost pricing in output market AND (b) dangerous probability of recoupment in output market

Criticism: D doesn't have to take a loss on a high bid/expensive purchase if they can turn around and sell the output for more than they bought it

  • However, this condition is hard to satisfy, so courts continue to use it.

Caselaw:​

Weyerhaeuser v. Ross-Simmons Hardware (2007) (predatory bidding analyzed under same standard as Brooke Group)​

  • Holding:
    • The company submitted the high bids because they wanted to exclude rivals from the market by purchasing all of the inputs
    • They planned to lower bids after competitor was disciplined
  • Facts: manufacturing company submitted high bids for logs.