HOW LOW DO ANTITRUST LAWS LET YOU GO? RECENT DECISIONS REGARDING DISCRIMINATORY, PREDATORY, AND BELOW-COST PRICING

By Ryan Sandrock and Kevin Burke¹

Most antitrust cases are about allegations of high prices: competitors who agree not to discount, monopolists who exclude price-cutting competitors, and acquisitions where an incumbent wants to grab market share to lessen competition and raise prices. And so most antitrust defenses are about low prices: the alleged price-fixers are sharp-elbowed discounters, the alleged monopolist is winning through better and competitively priced products, and the challenged acquisition would result in efficiencies and lower prices. These cases roughly equate harm to competition with harm to consumers in the form of higher prices, and both sides fight over the price charged at checkout to an end-user consumer.

Claims based on the opposite theory—that low prices have harmed competition in some way—are far less common.² The checklist for antitrust counselors on (too) low prices used to be pretty simple. First, to guard against Robinson-Patman claims of unlawful pricing discrimination,³ only charge different prices for commodities where there is a justification for the variance—different costs (volume discounts) or an attempt to meet a competitor’s price. In practice, Robinson-Patman claims were antitrust unicorns, lawyers liked to sketch them in their treatises but no one had seen one in real life. There were even calls to abandon Robinson-Patman completely. Second, to prevent a monopolization claim based on predatory pricing, do not adopt a strategy of pricing so low that competitors exit the market, allowing the company to recoup its losses by charging exorbitant prices when it is the only seller left standing. Again, in real markets, this situation was almost an impossibility. Third, to defend against below-cost pricing laws in California, do not price low with the goal of destroying competition. As described in a prior article in this publication, while California below-cost pricing law appears more lenient than federal law,

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