Dial Corp. et al. v. News Corp. et al. (1)
Antitrust, Monopolization, Damages Analysis, Class Certification
U.S. District Court for the Southern District of New York
Testimony by Professor Jeffrey MacKie-Mason of applEcon assisted packaged goods manufacturers to obtain class certification in a lawsuit alleging monopolization of the market for third party in-store promotions by News America Marketing (“News”). News buys exclusive access to at-shelf space from retailers, and sells at-shelf advertising and promotions to consumer packaged goods manufacturers, including Dial and Heinz. The plaintiffs allege that at-shelf advertising in stores supplied by third parties constitutes a relevant antitrust product market, and that News has maintained a monopoly of that market since at least 2000 by multiple exclusionary acts, including denying competitors access to retail space by entering into long-term exclusive contracts with retailers, using cash guarantees to derail competitors’ contracts with retailers, hacking into a competitor’s computer, disparagement of competitors, and entering into anticompetitive agreements with competitors.
The Court concluded that the central questions regarding liability are susceptible to common proof, and its opinion focused on the issues of common impact and damages. The defendant News argued that substantial price variation across customers and individually-negotiated prices for twelve different products precluded class-wide proof of antitrust injury. Professor MacKie-Mason presented an econometric model of News’s prices which showed that most price variation is explained by characteristics common to all purchases, such as product attributes, contract attributes, and product costs; he also presented evidence that these same factors were consistently referenced in News’s pricing documents and negotiations. The Court concluded that Professor MacKie-Mason’s econometric model of prices “suggests that pricing is capable of proof on a class-wide basis when combined with the deposition testimony, and documentary evidence… Although prices may differ on an individual level in both the actual and but-for worlds, Plaintiffs’ evidence suggests that prices are systematic and, thus antitrust injury is measurable with common proof.”
The fact that News’s alleged monopoly began virtually with the inception of the industry presented challenges for the estimation of monopoly overcharges. The Court recognized that “because News Corp. has allegedly maintained a monopoly in the market for ISPs [in-store promotions] since at least 2000, creating a benchmark using News Corp.’s prices during a time of ‘robust competition’ is not feasible”, rendering the commonly-used before-and-after approach to damages estimation infeasible; moreover, that “the selection of perfectly comparable benchmark firms aside from News Corp. is impossible where News Corp.’s alleged monopoly prevents comparable firms from operating within its market.” Professor MacKie-Mason met these challenges by selecting a sample of firms for a profitability benchmark based on objective factors important in the determination of competitive equilibrium profit margins: capital intensity, growth rate, and size. The Court concluded that “Dr. MacKie-Mason’s selection of benchmark firms is appropriate given the limitations inherent in this case”, and that his model is “sufficient to show that damages are measurable through use of a common methodology”, and granted certification to the class.
applEcon supported class counsel throughout the legal process, including issues identification, discovery, depositions, and merits disclosures. Defendant News and its experts raised complex issues, such as a claim that the market is two-sided with network effects. Despite these and other challenges, including deficient production and late production of large, complex data sets, Professor MacKie-Mason prepared and submitted four expert reports and rebuttal reports, including responses to three prominent expert economists regarding class certification, market definition, antitrust liability, and damages, all in less than 18 months. Success under demanding circumstances such as these calls for a team with the breadth and depth of experience necessary to foresee and plan for issues that are likely to arise, processes to handle heavy document production and large complex datasets efficiently, and the ability to communicate technical issues credibly, concisely, and clearly.
applEcon is a team of economists specializing in antitrust, intellectual property and commercial damages issues. We offer a complete range of services: expert testimony, consulting experts, or staff support for outside experts.
Read the Court’s opinion granting Plaintiff’s Motion for Class Certification.
Full Case Name: The Dial Corporation, Henkel Consumer Goods Inc, H.J. Heinz Company, H.J. Heinz Company LP, Foster Poultry Farms, Smithfield Foods, Inc., HP Hood LLC, BEF Foods Inc., Individually and On Behalf of Similarly Situated Companies v. News Corporations, News American Inc., News America Marketing FSI LLC, News America Marketing In-store Services LLC.
Year: Complaint dated 2012
Case Number: 1:13-cv-06802-WHP