The role of recoupment in predatory pricing analyses

Predatory pricing occurs when a company cuts its price in order to drive out or discipline a competitor and enjoy higher profits from reduced competition. Predatory pricing suits are seldom successful undercurrent doctrine. One major difficulty is that to succeed, a plaintiff must show "recoupment:" the likelihood that an alleged predator will enjoy high-enough profits from reduced competition to make its anti-competitive price cut worthwhile. This Note examines the proper role of recoupment, arguing that the optimal recoupment test is "narrow" and "deep," compared to the test commonly understood by courts and commentators. First, recoupment is best understood as a narrow, structural analysis of the market in question. Where courts use an alleged predator's conduct in addition to structure to discern recoupment, this practice produces perverse results. Second, economic research over the past twenty years suggests additional structural features, not previously considered by courts, that can deepen the inquiry into structure. A narrow-but-deep recoupment test is largely consistent with Supreme Court precedent.