CLICK HERE FOR PDF: Eliminating the Below-Cost Pricing Requirement from a Predatory Pricing Claim, 27 CARDOZO L. REV. 343 (2005).

By: Ari W. Lehman

Introduction
Predatory pricing is currently generating considerable debate in academic literature. There is growing concern that the current standards used to evaluate a predatory claim leave something to be desired. The United States Supreme Court established the current test for a federal predatory pricing claim in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. in 1993.  Brooke Group set up a two-part test for predatory pricing.  The elements of the offense were defined as: 1) pricing below some appropriate measure of the producer’s own cost, and 2) a sufficient likelihood of recouping this investment after rivals are eliminated. The Court stated that while these elements are difficult to establish, they are not arbitrary, since “they are essential components of real market injury.” This Note will argue that the Court was only half right.  Recouping through monopoly profits the revenue foregone in eliminating a rival constitutes a “real market injury.”  However, the pricing used to drive out a rival and its relationship to the producer’s cost is not relevant to market harm, and should be eliminated as an element of a predatory pricing offense.  In other types of antitrust claims a producer’s cost has been strongly rejected as bases for determining whether a violation has occurred. This Note proposes that a producer’s cost should be rejected as an element of predatory pricing as well.