## Facts

- The U.S. cigarette industry was highly concentrated and long dominated by a small number of firms, including Liggett Group, Inc. (owned by Brooke Group Ltd.) and Brown & Williamson Tobacco Corp. (B&W).
- Liggett created a discounted “generic” cigarette segment, selling unbranded products at substantial discounts to branded cigarettes and quickly taking most generic-segment sales.
- B&W entered the generic segment and used discounts and volume rebates to wholesalers, contributing to aggressive price competition.
- Liggett alleged B&W engaged in primary-line price discrimination under the Robinson-Patman Act by selling below cost to restrain the growth of generics and protect higher profits on branded cigarettes through later supracompetitive pricing.
- A jury found for Liggett, but the district court granted judgment as a matter of law to B&W, concluding Liggett failed to show injury to competition, including lack of evidence that generics’ growth slowed or that economy-segment prices were later coordinated upward.
- The Fourth Circuit affirmed, and the Supreme Court granted review.

## Issues

1. What elements must a plaintiff prove to establish primary-line price discrimination under the Robinson-Patman Act, as informed by Sherman Act § 2 predatory pricing doctrine?
2. Whether alleged below-cost pricing can establish competitive injury without proof that the defendant had a reasonable prospect (or dangerous probability) of recouping predation losses through later supracompetitive pricing.
3. Whether a theory of recoupment based on tacit oligopolistic coordination can satisfy the recoupment requirement on the evidence presented.

## Decision

- The Supreme Court affirmed judgment as a matter of law for B&W.
- The Court held that primary-line Robinson-Patman claims are analytically comparable to Sherman Act § 2 predatory pricing claims and require the same basic showings.
- A plaintiff must prove (1) prices below an appropriate measure of the defendant’s costs and (2) a reasonable prospect or dangerous probability that the defendant could recoup its below-cost investment through later supracompetitive pricing.
- Although oligopoly interdependence might, in theory, provide a recoupment mechanism, the Court found Liggett’s oligopoly-recapture theory too speculative on this record.
- Even assuming arguendo below-cost pricing evidence, Liggett failed to present sufficient evidence that B&W could realistically recoup, defeating the claim as a matter of law.

## Legal Principles

- The Robinson-Patman Act condemns price discrimination only to the extent it threatens injury to competition, not merely harm to a competitor.
- Primary-line Robinson-Patman liability tracks predatory pricing doctrine: the plaintiff must show below-cost pricing using an appropriate cost measure.
- Competitive injury from predation also requires proof of likely recoupment; without recoupment, low prices benefit consumers and do not establish antitrust harm.
- Recoupment theories requiring coordinated or tacitly coordinated conduct among oligopolists face strong economic and evidentiary obstacles because losses are concentrated on the alleged predator while any later gains are shared across rivals, including the alleged victim.
- Courts may remove predatory-pricing/primary-line claims from the jury where evidence does not permit a finding of probable recoupment.

## Conclusion

The Court required plaintiffs alleging primary-line Robinson-Patman predatory pricing to prove below-cost pricing and a realistic likelihood of recoupment, and it affirmed judgment for the defendant because the claimed oligopoly-based recoupment was not supported by sufficient evidence.


Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993)