The goals of antitrust—pretrial hearing no. 1: A verbatim account of an imagined proceeding

• Author: Joseph F. Brodley
• DOI: 10.1177/0003603X8302800402
• Published date: 01 December 1983
• Date: 01 December 1983
• Subject Matter: Article

The

Antitrust

Bulletin/Winter

1983

The goals

of

antitrust-pretrial

hearing no. 1: a verbatim account

of

an imagined proceeding

BY

JOSEPH

F.

BRaDLEY·

Pretrial hearing no. 1 (partial transcript)

823

Apretrial hearing is about to be held in the federal district court

of

Judge Harry Garfield, who is known for his deep and schol-

arly approach to the law. The case involves a claim of predatory

pricing in violation

of

the Sherman Act. The defendant, a full

line computer manufacturer with a dominant position in both

central processing units and peripheral equipment, allegedly re-

duced prices following plaintiff's entry as a peripheral equipment

manufacturer. The plaintiff, a small manufacturer of computer

memory

units-now

involved in a bankruptcy proceeding just

down the

hall-alleges

that

such prices were intentionally preda-

tory;

that

they forced plaintiff to leave the market; and

that

following that unfortunate event the defendant raised prices,

although not to their original level. The parties agree that the

defendant's prices were at all times above its marginal costs, but

it is disputed whether prices were above full cost. The judge

himself will explain the nature of the hearing.

Professor

of

Law, Boston University.

©1984 by Federal Legal Publications, Inc.

824 The antitrust bulletin

Court: Good morning, counsel. This case is now at an early

pretrial stage, and difficult rulings lie ahead for the court. I have

called you together to assist me in developing a better grasp

of

the

controlling issues

of

law. As you know, our court

of

appeals has

not determined what should be the appropriate rule for predatory

pricing cases, so that is something I shall have to decide here.

Now the court does appreciate the multicolored graphs and

charts you have attached to your briefs, and the ingenious pains

you have taken to explain how the Areeda-Turner rule Idiffers

from the Scherer rule,' and how both

of

these differ from the

Williamson rule,' and the court does not mean to slight the

Baumol rule,' the Posner rule,' the Joskow and Klevorick rule,"

or even the Ordover-Willig rule,' which I understand is the latest

entrant into this not entirely uncrowded field.

But my needs at this point are really more basic. Specifically,

counsel, I would like you to answer three questions. First, in

selecting an appropriate pricing rule can the court look to any

values other

than

economic efficiency? Second, if the court can

look at values other than economic efficiency, precisely what

should those values be? And third, in light of these consider a-

See 3

P.

AREEDA

&D.

TURNER,

ANTITRUST

LAW §712 (1978).

2See Scherer, Predatory Pricing and the Sherman Act: A Com-

ment, 89 HARV. L. REV. 869 (1976).

3See Williamson, Predatory Pricing: A Strategic and

Welfare

Analysis, 87

YALE

L.J.

284 (1977).

4See Baumol, Quasi-Permanence

of

Price Reductions: A Policy

for

Prevention

of

Predatory Pricing, 89 YALE

L.J.

1 (1979).

See R.

POSNER,

ANTITRUST

LAW:

AN

ECONOMIC

PERSPECTIVE

188-91

(1976).

6See Joskow &Klevorick, A Framework

for

Analyzing Predatory

Pricing Policy, 89

YALE

L.J.

213 (1979).

7See Ordover &Willig,

An

Economic Definition

of

Predation:

Pricing and Product Innovation, 91 YALE

L.J.

8 (1981).