Matsushita Elec. Ind. Co. v. Zenith Radio

In Matsushita Elec. Ind. Co. v. Zenith Radio, 475 U.S. 574 (1986), the defendants were charged with having violated Sects. 1 and 2 of the Sherman Antitrust Act, just as the defendants-appellees here were charged with violating the analogous Sects. 11-204(a)1 and 2 of the Maryland Antitrust Act. The Supreme Court pointed out that a predatory pricing scheme only constitutes an antitrust violation when there is a substantial likelihood that it will achieve and then maintain for the predators a monopoly status. The opinion further pointed out how difficult it is for an antitrust plaintiff to satisfy such a burden of proof. The success of such schemes is inherently uncertain: the short-run loss is definite, but the long-run gain depends on successfully neutralizing the competition. Moreover, it is not enough simply to achieve monopoly power, as monopoly pricing may breed quick entry by new competitors eager to share in the excess profits. The success of any predatory scheme depends on maintaining monopoly power for long enough both to recoup the predator's losses and to harvest some additional gain. Absent some assurance that the hoped-for monopoly will materialize and that it can be sustained for a significant period of time, "the predator must make a substantial investment with no assurance that it will pay off." Easterbrook, Predatory Strategies and Counterstrategies, 48 U Chi L Rev 263, 268 (1981). For this reason, there is a consensus among commentators that predatory pricing schemes are rarely tried, and even more rarely successful. 475 U.S. at 589. The Supreme Court summed up its holding, 475 U.S. at 590-91: If predatory pricing conspiracies are generally unlikely to occur, they are especially so where, as here, the prospects of attaining monopoly power seem slight. In order to recoup their losses, petitioners must obtain enough market power to set higher than competitive prices, and then must sustain those prices long enough to earn in excess profits what they earlier gave up in below-cost prices.