a. What is predatory pricing?
b. Did Brown & Williamson lower its prices below cost?
c. Did Brown & Williamson intend to drive Liggett out of business?
d. So why did Liggett lose?
e. Does predatory pricing harm consumers?
f. How could Liggett have proved that Brown & Williamson had enough market power to raise its prices on generics?
g. What theory of antitrust law is the Supreme Court applying?
Liggett began selling generic cigarettes at a price 30 percent below that of branded cigarettes. Brown & Williamson retaliated by introducing its own generics at an even lower price. Liggett sued, claiming that Brown's prices were below cost. The Supreme Court agreed that Brown was selling below cost and that it intended to harm Liggett. Brown still won the case, however, because there was no evidence that it would be able to recover its losses from the below-cost pricing. If Brown raised its prices, other competitors would come back into the market.