Predatory Pricing Idea Unrealistic

By 1993, Bloomberg Business News | St Louis Post-Dispatch (MO), August 12, 1993 | Go to article overview

Predatory Pricing Idea Unrealistic


1993, Bloomberg Business News, St Louis Post-Dispatch (MO)


A jury of nine men and three women, plucked from this mostly blue-collar community on the Gulf of Mexico, on Tuesday arrived at the same conclusion as a growing number of economists and legal theorists: There's no such thing as predatory pricing.

In finding American Airlines innocent of conspiring to drive competitors out of business with a fare war last summer, the federal court jurors agreed with the carrier's experts that such a scheme would be extraordinarily expensive, and have no realistic chance of success.

Some scholars are so convinced predatory pricing doesn't work that they think the courts shouldn't even consider such cases.

Continental Airlines and Northwest Airlines, the plaintiffs, may appeal Tuesday's verdict. But the swiftness of the decision and the fact that predatory pricing appeals usually fail could discourage them from spending any more money on the case. American, the only party in the case to reveal its legal costs, spent more than $20 million defending itself.

A prominent opponent of the concept of predatory pricing is one-time Supreme Court nominee Robert Bork. In his 1978 book, "The Antitrust Paradox," Bork said antitrust law was twisted in the 1950s and 1960s from its original purpose - protecting consumers against price-gouging monopolies - to protecting small businesses from more-efficient competitors that were using their creativity and acumen to dominate markets.

When courts intervened on behalf of weaker competitors, Bork argued, they actually hurt consumers by restricting their access to the most efficient providers of goods and services.

This view, generally identified with the University of Chicago, where Bork once taught, seems to be held by a majority on the U.S. Supreme Court.

In a landmark 1986 case, for example, the court threw out an appeals court verdict in favor of Zenith Radio Corp. against Matsushita Electric Industrial Corp., saying Zenith had failed to prove that Matsushita had conspired with other Japanese manufacturers to monopolize the U.S. television business through predatory pricing.

The high court tightened standards even more with a June 21 decision involving Brown & Williamson Tobacco Corp. …

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