unlawful, namely its descent below that figure.
Although the foregoing considerations would seem to establish that the facts at bar come under the general umbrella of the cited rulings, it must be recognized that neither of the cited cases deals with facts remotely similar to those at bar. Indeed no one - either counsel for the parties or my chambers - has been able to find a case with facts even vaguely resembling those at bar which - as we have seen - involve a plaintiff who (1) loses a contract because it was underbid by $ 44 a unit (or a total of $ 2,755,659),
(2) hires an expert to come up with the highest possible figure that could be claimed to be the winning firm's non-predatory bid, and then (3) sues for treble damages even though its own bid was $ 9 a unit higher than the figure it had thus obtained from its own expert.
With no case exactly on point, one must look to a general understanding of antitrust law to determine whether or not there is any reason why the cited rules should not apply to this particular treble damage plaintiff. In this circuit at least, such an inquiry would begin - and probably end - with Professors Areeda's and Turner's seminal article.
In this article the authors examined various aspects of the law of predatory pricing. One of their concerns was to avoid suggesting any rule which would either (1) materially deter rather than foster meaningful competition or (2) subject competing firms to unnecessary risk of expensive litigation.
In the introductory portion of the article, after observing that "proven cases of predatory pricing have been extremely rare," they offer the following admonition (Areeda & Turner, at 699):
That predatory pricing seems highly unlikely does not necessarily mean that there should be no antitrust rules against it. But it does suggest that extreme care be taken in formulating such rules, lest the threat of litigation, particularly by private parties, materially deter legitimate, competitive pricing.
Further into the article, after discussing - and deciding against - the advisability of prohibiting "marginal cost pricing," the authors observe (Areeda & Turner, at 711):
To hold the monopolist responsible, after-the-fact, for reasonable miscalculations would be an intolerable burden, and encourage a high price policy in order to be safe.
Lastly, after a discussion under the heading "average variable cost as a surrogate for marginal cost," the authors offer the following general observation (Areeda & Turner, at 718):
Moreover, given the relatively rare occurrence of predatory pricing, we believe that a slightly permissive rule is acceptable since the threat of litigation under any rule on predatory pricing is more likely to discourage proper pricing than predation, and the benefit of any doubts should go toward protecting the seller, instead of increasing his vulnerability.
The logic of these thoughts compel the rejection of plaintiff's suggested theory of liability. Had the authors been thinking of the very facts here at bar, nothing could more accurately have described the instant situation than their statement that to "hold the monopolist responsible, after the fact, for reasonable miscalculations would be an intolerable burden, and encourage a high price policy in order to be safe." Should plaintiff's theory of the law prevail, any firm that might in the future find itself in Goodyear's position would - in order to protect itself from potentially ruinous litigation - bid a price high enough not only to cover its own estimate of average variable costs, but also to cover any possible figure a competitor's "hired gun" accountant might suggest. Any competitor, knowing the difficulties under which the Goodyear-like firm would be operating, would calculate its bid accordingly. It seems unlikely that the Congress had any such objective in mind when it designed the antitrust laws as a "consumer welfare prescription."
See Reiter v. Sonotone Corp. (1979) 442 U.S. 330, 343, 60 L. Ed. 2d 931, 99 S. Ct. 2326 .
As above indicated, plaintiff's memorandum in opposition to the instant motion advances no argument as to the correctness or error of my original decision. This is a disappointment. At our September 3 conference, plaintiff complained that it had been prevented from fully expressing its views (Conferences Minutes, at 15). Hoping to remedy this, on the following day I addressed a letter to counsel advising them of my inclination to grant defendant's motion and urging them to submit memoranda explaining their positions. Having failed to get from plaintiff any memorandum on the merits, I shall deal with the arguments its counsel advanced at the conference.
Counsel there made two basic contentions: (1) Lee-Moore Oil Co. v. Union Oil Co. of California (4th Cir. 1979) 599 F.2d 1299, 1302 completely defeats defendant's motion (Conference Minutes, at 17); and (2) standards applicable to government bidding should be different than those applicable to commercial bidding because the law requires the government to accept the lowest bid regardless of what its preference might be (Conference Minutes at 40-42).
The Lee-Moore argument can be readily discarded. Counsel stated his understanding of the Lee-Moore rule as follows (Conference Minutes, at 17):
What Lee Moore says is that you can't reconstruct the conduct to say if the low bidder had bid higher, it could have still been legal; therefore, no causation. That's our view of Lee-Moore and that is exactly what the Court of Appeals ruled.
I agree with that statement of the rule. I also agree that as so stated the rule defeats the argument Goodyear advanced on appeal, namely, that its likely subsequent conduct could have rendered harmless any injury caused by its original bid. However, as so stated, Lee-Moore sheds no light on the question of whether or not I correctly ruled that plaintiff had not in the first place been injured by the unlawful aspect of that bid.
With respect to the second point, about the government being compelled to accept Goodyear's bid, the logic of this argument escapes me. The fact that the government (or any other entity) might be compelled to accept the lowest bid can in no way influence the determination of whether or not plaintiff's injury was caused by "that which" made a defendant's bid unlawful. Moreover, plaintiff does not suggest any policy reason why different standards should apply to government than to commercial bidding. For example, plaintiff points to no evidence suggesting that in the instant case the government, had it been free to do so, would have considered rejecting defendant's bid in favor of plaintiff's and thus increasing its own expenditures by almost three million dollars. Nor does plaintiff cite any statistics suggesting that, in commercial bidding, firms reject the lowest bid in sufficient numbers to require a different rule for governmental as opposed to commercial bidding.
Having concluded that the Court of Appeals did not rule upon, and therefore could not have rejected, the basis of my original decision, and having reconsidered that decision, I grant Goodyear's motion to dismiss the complaint.
New York, New York
October 21, 1992
WHITMAN KNAPP, SENIOR U.S.D.J.