Justices delve into predatory bidding allegation in logging industry in Northwest

Tuesday, November 28th 2006, 12:28 pm

By: News On 6

WASHINGTON (AP) _ The Supreme Court on Tuesday questioned whether forest products giant Weyerhaeuser Co. drove a smaller competitor out of business by paying too much for logs that Weyerhaeuser allegedly didn't need.

The case focuses on the lumber industry in the Pacific Northwest and pits a defunct company, Ross-Simmons Hardwood Lumber Co., against Weyerhaeuser and the Bush administration.

Weyerhaeuser is fighting an $80 million award to Ross-Simmons stemming from a jury verdict that found the larger company had violated federal antitrust law.

Ross-Simmons accused Weyerhaeuser of paying too much for alder logs and not using what it bought, with the goal of driving out competing sawmills. Alder, the predominant species of hardwood logs in the Northwest, is used in furniture and specialty products such as picture frames and musical instruments.

Arguments before the Supreme Court Tuesday turned on what legal standard Ross-Simmons must meet in order to win in court and whether a jury instruction in the case was faulty.

Companies often attack competitors by selling products at a lower price, benefiting consumers in the short term. A high legal standard must be met for a company engaging in such conduct to be found to have acted illegally. But there is no such apparent benefit in the Weyerhaeuser case. Isn't that a reason not to apply the elevated standard? asked Chief Justice John Roberts.

``We don't think so,'' replied Andrew Pincus, representing Weyerhaeuser. Pincus pointed out that buying at a higher price in this instance would benefit the sellers supplying logs to Weyerhaeuser.

Pincus added that Weyerhaeuser had invented a new processing technique, making more efficient use of the logs it bought, thus benefiting consumers.

Ross-Simmons lawyer Michael Haglund said there is evidence in the case that Weyerhaeuser warehoused large volumes of lumber rather than processing it.

Kannon Shanmugam, a Justice Department lawyer from the solicitor general's office, suggested that Weyerhaeuser's conduct may well have been helpful to the marketplace.

``Aggressive bidding no less than price-cutting is usually pro-competitive,'' Shanmugam told the justices.

Justice Antonin Scalia suggested Weyerhaeuser's conduct might make perfect sense _ paying more to ensure that its mills had an adequate supply of logs.

That prompted Justice David Souter to interject that those circumstances apparently aren't present in this case. Evidence presented by Ross-Simmons, Souter said, is that the supply of logs was limited.

The case is Weyerhaeuser v. Ross-Simmons, 05-381.