High court voids Weyerhaeuser penalty

February 21, 2007|By Bloomberg News

WASHINGTON -- The U.S. Supreme Court overturned a $79 million antitrust award against lumber producer Weyerhaeuser Co. yesterday in a ruling that will help shield companies from claims that they illegally tried to drive a competitor out of business.

The justices unanimously said a jury used the wrong standard in concluding that Weyerhaeuser monopolized the Pacific Northwest market for finished alder, a hardwood used in furniture. A now-defunct rival accused Weyerhaeuser, the world's biggest forest products company, of overbidding for scarce logs.

The ruling is a victory for large U.S. companies, giving them more room to bid aggressively for raw materials and other supplies without the risk of violating federal antitrust laws. Dow Chemical Co., Verizon Communications Inc., Coca-Cola Co. and Microsoft Corp. were among the companies that supported Weyerhaeuser at the Supreme Court.

"There are myriad legitimate reasons - ranging from benign to affirmatively procompetitive - why a buyer might bid up input prices," Justice Clarence Thomas wrote for the 9-0 ruling.

The case focused on a judge's instruction to jurors that they could award damages if Weyerhaeuser bought "more logs than it needed" and prevented Ross-Simmons Hardwood Lumber Co. from acquiring logs at a "fair price."

The 9th U.S. Circuit Court of Appeals in San Francisco upheld the instruction, rejecting Weyerhaeuser's contention that it was too vague to provide meaningful guidance.

The Supreme Court said the 9th Circuit should have applied a legal standard similar to the one the Supreme Court used in a 1993 predatory-pricing case. That case required proof that an antitrust defendant sold its product below cost and was likely to recoup those losses after competition had been driven out.

Ross-Simmons said the 1993 ruling wasn't applicable because the Weyerhaeuser case involved overpayments for raw materials, not predatory price cuts. The company said courts set an especially high bar for predatory-pricing cases because lower prices directly benefit consumers.

Ross-Simmons acknowledged at an argument session in November that it hadn't met the standard from the 1993 case.

Ross-Simmons, which went out of business in 2001, was based in Longview, Wash. It accused Weyerhaeuser of paying higher-than-market prices for alder wood, buying more than it needed, entering into exclusive agreements with suppliers and illegally buying logs from state forests.

A jury in Portland, Ore., said in 2003 that Ross-Simmons was entitled to compensation of more than $26 million, an amount that was tripled under federal antitrust rules.

The award would have been the largest so far in a set of lawsuits against Weyerhaeuser over its finished alder business. The company, which is based outside Seattle, has paid $62 million to resolve some of those claims and put $95 million in reserve, according to regulatory filings.

In addition, Weyerhaeuser is fighting a $16 million award to rival Washington Alder LLC and a class action lawsuit filed on behalf of purchasers of finished alder. Both cases have been on hold during the Supreme Court appeal.

Weyerhaeuser shares fell 20 cents to close at $82.83 yesterday on the New York Stock Exchange.

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