Predatory pricing, the theory of the firm, and the recoupment test: An examination of recent developments in Canadian predatory pricing law

摘要

Federal antitrust law in the United States on predatory pricing is clear. The U.S. Supreme Court set out a two-stage test for determining predation in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. First, it must be shown that the alleged predator priced below an appropriate measure of cost. Second, under the recoupment aspect of the test, it must be demonstrated that there is a reasonable prospect that the alleged predator would be able to recoup its investment in below-cost prices. The plaintiff must show that "there is a likelihood that the predatory scheme alleged would cause a rise in prices above a competitive level that would be sufficient to compensate [the alleged predator] for the amounts expended on predation, including the time value of the money invested in it." The Court offered examples of where predation would be unlikely to lead to recoupment: where barriers to entry are low, or where the market structure is diffuse and competitive. In Brooke Group itself, the Court found that recoupment, and therefore predatory pricing, was implausible given the oligopolistic nature of the market. While the oligopoly as a group may have had an incentive to engage in predatory pricing, no individual oligopolist, in the Court's view, would have profited from doing so.