Alder case cuts at antitrust

A Longview mill's lawsuit against Weyerhaeuser will be argued today before the U.S. Supreme Court in a case expected to help define the scope of U.S. antitrust laws.

The lawsuit focuses on a small but valuable sliver of the Northwest timber industry — alder used to make furniture, guitars and cabinetry — and the claim that Weyerhaeuser bid up the price of these hardwood logs to make the alder business uneconomical for competing mills.

In 2003, the lawsuit resulted in a nearly $80 million federal jury award in Portland to Ross-Simmons Hardwood Lumber, a now-defunct Longview mill that alleged Weyerhaeuser's predatory tactics ran it out of business.

Weyerhaeuser argued unsuccessfully in the 9th U.S. Circuit Court of Appeals that the Portland judge applied the wrong antitrust standard in the case. The company is now asking the Supreme Court to overturn the verdict.

"This is a first for us," said Bruce Amundson, a Weyerhaeuser spokesman. "You don't take something to the Supreme Court lightly, and they don't accept something lightly."

The Supreme Court's decision is expected to help guide corporate conduct in many industries where there may be fierce bidding to gain control of critical supplies. Thus, the case has attracted attention from a wide range of interests.

Earlier, Microsoft, which has its own battles over antitrust, joined in a brief requesting the Supreme Court hear the case.

Others that have sided with Weyerhaeuser include the U.S. Justice Department and the U.S. Chamber of Commerce. They have argued that the lower court's ruling sets up a vague new standard for antitrust activity that could put a chill on legitimate competition to secure key materials.

"The court displayed fundamental misunderstanding of the forms legitimate competition may take in a market economy," declared the brief filed by the Chamber of Commerce and the American Forest & Paper Association.

Ross-Simmons' position also has drawn plenty of support, including filings from the American Antitrust Institute and eight states concerned that overturning the lower court's ruling would weaken their efforts to enforce federal antitrust laws against "those who adopt abusive tactics in seeking to manipulate the market and suppress competition."

Oregon and California were among the eight states to request the original verdict be upheld. But Washington, which hosts both the headquarters of Weyerhaeuser and Ross-Simmons, did not take a position.

"It's not a comment on the merits one way or the other," said Brady Johnson, a Washington state assistant attorney general. "It looked like all the bases were already covered."

The key issue facing the Supreme Court is how to define violations of federal antitrust law. Many cases involve schemes of below-market pricing, intended to drive rivals out of business.

This case focused on another end of the spectrum, a scheme to bid up the price of raw materials.

In the U.S. District Court, attorney Mike Haglund introduced evidence of a deliberate scheme by Weyerhaeuser to seize control of the alder log market to force competitors out of business. At the time of the 2003 verdict, Weyerhaeuser controlled more than 70 percent of the $400 million Northwest alder industry in Washington and Oregon.

Weyerhaeuser, in its brief to the Supreme Court, argued that Ross-Simmons should have been forced to prove two additional points: that Weyerhaeuser's finished alder products were sold at levels below the cost of production, and that the company would probably recoup those losses once the predatory scheme was complete and rivals were driven out of business.

The failure to impose that standard "requires that the verdict be set aside," the Weyerhaeuser brief declared.

Ross-Simmons, in its Supreme Court brief, argued there is no need to prove such below-cost sales to alder consumers.

"If Weyerhaeuser is successful in getting the rule they want, it won't matter how much you bid up the price of inputs, and manipulate the price upwards, so long as you're making money on the ultimate product," said Mike Haglund, Ross-Simmons Portland-based attorney, who filed the initial lawsuit and has had the rare opportunity to try the case all the way to the Supreme Court.

In a morning session today, Weyerhaeuser and the Justice Department will share 30 minutes of time to argue why the ruling should be overturned.

Haglund will have 30 minutes to make the case for Ross-Simmons.

In the courtroom will be John Simmons, whose family founded Ross-Simmons and then had to close the mill in 2001.

Simmons is still waiting to receive the jury award, which has been put on hold as the case winds its way through the federal court system. And, he says, his company remains in debt to creditors.

"That's the way the system works. It's loaded toward big business," said Simmons.

"We have been fighting Weyerhaeuser for a long time, and this has had a huge effect on us and the lives of our employees."

Hal Bernton: 206-464-2581 or hbernton@seattletimes.com