Seventeen companies sued General Electric (“GE”), alleging that GE engaged in anticompetitive conduct in the sale of refurbished anesthesia machines and the servicing of all GE anesthesia machines. Following a seven-day trial, a unanimous jury awarded plaintiffs damages of $43,083,344, finding that GE violated Sections 1 and 2 of the Sherman Act and Sections 3 and 7 of the Clayton Act. Under federal antitrust law, the plaintiffs are entitled to treble damages, bringing the award up to $131.4 million. applEcon was instrumental in securing this award, supporting plaintiffs’ counsel and their economic expert, Dr. Donald R. House, Sr., and his firm, RRC, Inc. Leading the applEcon team were senior economists John Metzler and Rick Pfau, who drew on their experience providing liability support for the 1995 trial of Image Technical Services, Inc. v. Eastman Kodak Co., a case also involving harm to competition in an aftermarket for maintenance services.

GE is the United States’ largest supplier of anesthesia machines—expensive, durable equipment used by hospitals and ambulatory surgery centers to deliver anesthesia to patients. With a market share of roughly 70%, GE machines, sold under the Datex-Ohmeda brand since 2003, are commonplace in operating rooms across the country. Each machine requires annual preventative maintenance on top of any unplanned repairs, creating a demand for technicians certified in servicing GE anesthesia machines. GE, in addition to selling the equipment, offers customers the option of hiring GE technicians to handle the maintenance. Customers seeking lower-cost alternatives may hire asset managers, such as Aramark and Sodexo, to service their clinical equipment, including anesthesia machines, or independent service organizations (“ISOs”) specializing in anesthesia machines. The plaintiffs in this case were all anesthesia ISOs.

Plaintiffs alleged that GE spent years trying to force ISOs out of the servicing market, leveraging its monopolies in GE anesthesia machine training and replacement parts. Most notably, in a series of efforts to deny ISO technicians factory training, which hospitals require their anesthesia servicers to have, GE forced ISO training applicants to restrict their services to a single customer. Furthermore, beginning in 2011, GE stopped selling replacement anesthesia parts directly to ISOs, forcing them instead to go through a distributor, Alpha Source, Inc. This policy led to higher part prices and slower delivery times, which plaintiffs alleged was GE’s goal.

Refurbished anesthesia machines, which are retired machines that have been reconditioned for further use, are sold by several of the plaintiffs as a cheaper alternative to new machines. Refurbished GE machines, like new GE machines, require GE parts and GE-certified labor, thus making the sale of these machines susceptible to the same anti-competitive practices that hurt the servicing side of the ISOs’ businesses.

This case was especially complex, requiring a thorough understanding of two product markets that suffered damages—anesthesia machines and anesthesia servicing—and two closely-related markets—anesthesia training and anesthesia parts. applEcon was hired to assist with the demanding economic research and analysis, and its team made numerous contributions to the case. One initial step was to use GE part sales and time and materials (“T&M”) data to create a list of anesthesia parts for identification in the distributor and plaintiff data. Using this part list, applEcon analyzed the distributor sales data and confirmed that GE’s distributor policy hurt ISOs. applEcon also examined GE’s training data to quantify the negative effect of GE’s foreclosure attempts on ISO registrations. After developing a deep understanding of market characteristics and defendant discovery, applEcon was able to categorize GE’s and its distributor’s part customers into ISOs, end-customers, and asset managers. applEcon was then able to use data on part sales, GE service contracts, GE T&M charges, and the installed base of GE anesthesia machines to calculate the anesthesia service market shares of GE, asset managers, and ISOs. Dr. House used this actual ISO market share and an estimate of the but-for ISO market share to calculate plaintiffs’ lost sales, which were fed into his damages calculations.

applEcon provided extensive assistance to plaintiffs’ counsel, ranging from document interpretation to on-site consultation throughout the trial. The applEcon team also helped plaintiffs’ counsel successfully respond to Daubert and Summary Judgment motions. Additionally, applEcon aided in rebutting the expert report written by the defendants’ economist, identifying advanced statistical tests that supported Dr. House’s model and rebutted an ad hoc attack raised by GE’s expert.

For further information on the verdict, see:

• Texas Jury Hits GE for $44M Anesthesia Machine Monopoly
• Texas Jury Returns $131.4M Verdict Against GE over Anesthesia Equipment Parts Monopoly

Full Case Name: Red Lion Medical Safety Inc. et al. v. GE Co. Inc. et al.

Year: Complaint dated 2015

Case Number: 2:15-cv-00308

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applEcon’s first and largest state case on behalf of consumers against Microsoft was filed nearly a year before Judge Jackson found Microsoft liable in U.S. v. Microsoft. We played a central role in defeating an attempt to co-opt our California clients’ case in a settlement proposed in federal court by Microsoft and MDL attorneys.

The California plaintiffs, supported by applEcon, broke new ground by alleging that Microsoft had illegal monopolies in desktop word processing and spreadsheet software, in addition to its PC operating systems monopoly. applEcon’s expert witness provided testimony on class certification, overcharge damages, and causation. Our research staff provided the liability expert economist’s support. California consumers and schools received from Microsoft a settlement valued at $1.1 billion.

Subsequently-filed indirect purchaser cases against Microsoft in Minnesota, Iowa, Arizona, New Mexico, Montana and Massachusetts brought the total value of settlements won in cases supported by applEcon to $1.6 billion.

Most recently, in an event rare in Canadian jurisprudence, our clients in British Columbia achieved certification of a class of indirect purchasers of Microsoft software. The damages analysis in our previous cases to which applEcon’s witness testified in Vancouver was described by our clients as a “dream record” for class certification. The British Columbia Supreme Court’s Reasons for Judgment, referring to applEcon’s prior damages work, said that the “evidence in support of certification for the case at bar is, because of the work done in the United States, far more detailed and specific” than required to meet the class certification standard.

At applEcon, we take seriously our obligation to the court to render sound expert opinions that are firmly grounded in fact, and to communicate our analyses simply and clearly. Our record of successes in the Microsoft antitrust suits shows that our way of working benefits consumers and our clients.

The post Class Action Cases Against Microsoft appeared first on applEcon.

Microsoft settled with indirect purchasers of Microsoft software in Canada for CAD $517 million in Pro-Sys Consultants Ltd. and Neil Godfrey v. Microsoft Corporation and Microsoft Canada Co. Class Members who are non-volume licensees will receive cash payments and volume licensees will receive volume licensee vouchers.

Pro-Sys Consultants Ltd. v. Microsoft was filed in December of 2004 and was one of the first indirect purchaser antitrust class actions to be certified in Canada. Pro-Sys Consultants Ltd. v. Microsoft is part of a trilogy of landmark cases, which also includes Sun-Rype Prods. Ltd. v. Archer Daniels Midland Co., 2013 SCC 58 (Can.) and Infineon Technologies AG v. Option consommateurs, 2013 SCC 59 (Can.)., where the Supreme Court of Canada decided in favor of the Plaintiffs, authorizing indirect purchasers to file antitrust class action lawsuits.

The Plaintiffs alleged Microsoft engaged in various acts, beginning in the late 1980s and continuing beyond the turn of this century, to monopolize the PC operating system, word processor, and spreadsheet markets. The resulting monopolies allowed Microsoft to impose overcharges on Canadian purchasers of Microsoft software that would not have obtained absent the anticompetitive behavior. While many of the core allegations mirrored those previously made in numerous class actions in the United States, the Canadian action covered damages suffered over the period December 1998 to March 2010.  The damages periods in the U.S. cases ended considerably earlier, prior to the introduction of smart phones and growing use of web-based office applications like Google Docs.  This presented significant new issues for liability, causation, and damages analysis.

applEcon’s experts, Dr. Janet Netz and Dr. Jeffrey MacKie-Mason, played essential roles throughout the litigation. Dr. Netz filed affidavits in support of class certification in 2007, later becoming the Plaintiffs’ expert on the relevance to Canadian indirect purchasers of damages methods used to calculate Microsoft’s damage to American indirect purchasers. Dr. Netz opined that the three methodologies used to calculate damages in the U.S. Microsoft cases, the price premium, rate of return, and profit margin methods, were equally applicable to, and could be implemented in, Canada. She was cited to repeatedly in the ruling by the Supreme Court of Canada. Dr. MacKie-Mason was the Plaintiffs’ causation expert. applEcon also provided supplemental support for liability expert Dr. Rick Warren-Boulton and damages expert Dr. James Brander, who applied variations on Dr. Netz’s rate of return and margin methods to Canadian data.

Since 2003, applEcon has provided key economic expertise and expert support in eight indirect purchaser class actions that have resulted in $1.86 billion of recovery to indirect purchasers of Microsoft software in the U.S. (AZ, CA, IA, MA, MN, NM, and WI) and CAD $517 million of recovery to indirect purchasers of Microsoft software in Canada.

For further information in the Pro-Sys Consultants Ltd. v. Microsoft case, see:

Pro-Sys Consultants Ltd. v. Microsoft Class Website, CFM, 18 September 2018
“Microsoft Software Class Actions – Canada Notice to Class Members”, Microsoft Canada, 18 September 2018

Full Case Name: Pro-Sys Consultants Ltd. and Neil Godfrey v. Microsoft Corporation and Microsoft Canada Co.

Year: October 31, 2013

Case Number: 34282

The post Pro‑Sys Consultants Ltd. v. Microsoft Corporation appeared first on applEcon.

Consultation with applEcon economists helped Collins Inkjet to demonstrate that their claim met a precedent-setting new standard for tying, and defeat the defendant’s appeal of a preliminary injunction in Collins Inkjet Co. v. Eastman Kodak. The plaintiff, Collins Inkjet claimed that Kodak tied its printer ink to Kodak printhead refurbishment in violation of Section 1 of the Sherman Act. Collins’s expert economist, Professor John Bowblis, demonstrated to the satisfaction of the Court that Collins was likely to succeed on the merits, and the court issued a preliminary injunction barring the challenged pricing policy. Kodak appealed the injunction, challenging the legal standard applied by the district court. Collins Inkjet called upon applEcon to consult regarding issues related to implicit tying.

A “tie” is an agreement to sell one product on the condition that the buyer also purchase a different  product. Courts have held that tying is illegal under Section 1 of the Sherman act when four conditions are satisfied: the tying and tied goods are separate products, a tie exists, the defendant has sufficient power in the market for the tying good that the tie forces consumers to buy the tied good, and the tie affects a not insubstantial amount of commerce.

Since Virtual Maintenance v Prime Computer, over twenty years ago,courts have recognized that a tie can be imposed by policies which induce rational buyers to purchase the tied good when they buy the tying good. To illustrate such “implicit tying”, setting a price of zero for the tied good conditional on purchase of the tying good “forces” all rational buyers to acquire the tied good from the defendant when they buy the tying good. Collins Inkjet alleged that Kodak’s prices induced rational purchasers to buy ink from Kodak. Relying on the 6^th Circuit Court’s decision in Virtual, the district court found that Collins was likely to succeed on the merits, and enjoined Kodak from charging the challenged prices. Kodak appealed the injunction to the 6^th Circuit. The 6^th Circuit established a new standard for implicit tying: “a tie enforced solely through differential pricing… is not unlawful unless the differential pricing is the economic equivalent of selling the tied product below the defendant’s cost.” “This analysis is the same as the Ninth Circuit’s analysis of bundled discounts, an analogous pricing policy governed by § 2 rather than § 1 of the Sherman Act”, often called the “discount attribution test”.

applEcon’s roots run deep in the topic of anticompetitive tying and bundling. One of applEcon’s founders, Jeffrey MacKie-Mason, was the expert economist in Virtual v. Prime, and also in the precedent-setting tying case Eastman Kodak v. Image Technical Services; two of applEcon’s current senior economists provided extensive support on that case as well. More recently, applEcon demonstrated an implicit tie to the satisfaction of a jury in Valassis v. News America. So when Kodak appealed Collins’s preliminary injunction to the 6^th Circuit, Collins Inkjet retained applEcon.

The 6^th Circuit’s new standard would have presented Collins Inkjet with a problem, as the Court noted in its opinion, “[t]he record makes it difficult to determine conclusively Kodak’s ink production costs”. How, then, could Collins satisfy a standard that calls for a comparison of price to cost? In its review of the evidence, applEcon found that, according to Kodak’s own analysis, Kodak would make greater profit if customers (irrationally) refused Kodak’s implicit tie than it would if customers made the rational decision to accept Kodak’s ink under the implicit tie. applEcon recognized that this evidence, when coupled with a little algebra, demonstrated, as the 6^th Circuit found, that “as a matter of formal logic, [footnote omitted] that Kodak’s pricing is coercive under the discount attribution standard”. The omitted footnote replicates applEcon’s algebra.

Read the Court’s opinion here.

Full Case Name: Collins Inkjet Corporation v. Eastman Kodak Company

Year: Complaint dated 2013

Case Number: 1:13-cv-00664-MRB

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Testimony from Dr. Janet Netz of applEcon assisted purchasers of cathode ray tube (CRT) televisions and computer monitors to obtain cash settlements totaling $563 million from seven CRT manufacturers. applEcon supported class counsel throughout the legal process, submitting nine expert reports related to class certification, antitrust liability, damages, and other issues, and helping counsel with discovery, depositions, hearings, responses to motions, and settlement negotiations.

CRTs were the dominant technology used to display pictures in televisions and computer monitors in the 1990s and early 2000s. The defendants were CRT manufacturers that collectively controlled approximately 90% of worldwide CRT production. Plaintiffs allege that the defendants formed a cartel to fix prices to direct purchasers, including television and monitor manufacturers, and that these overcharges on CRTs were subsequently passed on through the distribution channel to class members, who purchased CRT televisions and monitors in 22 states of the US during roughly 1995-2007. Like the LCD case, in which Dr. Netz also testified, this case was complicated by multiple defendants, based in foreign countries, some of which manufactured both the components at issue (CRTs) and final goods (e.g. CRTs and televisions). Unlike the LCD case, only one defendant in the CRT case submitted a guilty plea.

Certification of the CRT class presented several new challenges. The conspiracy began 20 years ago; document production was not made by cartel members that no longer existed;CRT demand was declining during the damages period, causing prices to fall, which created the opportunity for Defendants to claim that they did not “raise price”. Despite evidence that the cartel met at least 100 times to discuss market conditions, and set approximately 1,800 target prices, the defendants argued that class-wide analysis was impossible due to the nature of the industry: highly differentiated products, individualized customer negotiations, falling prices, and the multiple paths taken by different CRTs through the distribution channel.

Based on standard economic theory, statistical evidence, and a deep understanding of the industry and the practices of the cartel revealed by documentary evidence, Dr. Netz testified during class certification that CRTs prices manifested a price structure (e.g. larger models are priced higher than similarly-equipped smaller models), which enabled the cartel to cause all of its CRT prices to be above competitive levels by setting target prices for a subset of all CRTs. She demonstrated to the Court’s satisfaction that, contrary to the defendants’ claims, a small number of fundamental product attributes explained the great majority of CRT price variation. She then showed that the cartel’s price-fixing practices were keyed to those fundamental attributes.

As the Interim Special Master explained Dr. Netz’s price structure theory, “all of those individualized discounts started from an artificially increased platform… but for the cartel, the customers who obtained various price discounts would have paid even lower prices. [emphasis in original]. The Interim Special Master concludes that Dr. Netz’s response is in accordance with sound economic logic… she did not in any way ‘ignore’ data regarding individualized discounts; rather, she demonstrated why they do not invalidate her theory.” The defendants filed a motion to strike this, and other testimony by Dr. Netz. The Interim Special Master found her testimony to be reliable, and rejected “defendants’ reliance on anecdotal testimony of outlier circumstances as a substitute for Dr. Netz’s detailed, record-based analysis”.

The Interim Special Master concluded that “Dr. Netz has offered a reliable methodology to assess classwide damages using common proof”, finding that she “substantively described four detailed and widely-accepted methodologies to calculate the ‘but for price’” that would have been paid by direct purchasers(such as television and monitor manufacturers) in the absence of the cartel.

To determine whether overcharges paid by direct purchasers were passed through the distribution channels to purchasers of CRT televisions and monitors in the United States, Dr. Netz performed 47 econometric analyses of pass-through for class certification. Following applEcon’s standard practice, the data she used in her pass-through studies,  representing tens of millions of transactions and 14 retailers operating at all levels of the distribution channel over 17 years, encompassed all of the data in usable form that were available. She concluded that it is possible to quantify the pass-through of overcharges using common evidence, and that virtually all class members suffered common harm in the amount of at least 100% of the overcharge paid by direct purchasers. Dr. Netz performed additional analyses during the merits stage as more data became available.  

After conducting a “rigorous analysis”, the Interim Special Master concluded that “the proposed classes meet the requirements of Rule 23(a) and 23(b)(3).” The Court found the Interim Special Master’s reports to be “in all respects well-reasoned, thorough, and correct”, and the Court adopted “the ISM’s summaries and discussions of the facts and the parties’ contentions in full”, granted the plaintiffs’ motion to certify the class, and denied the defendants’ motion to strike Dr. Netz’s testimony.

In addition to addressing class certification, Dr. Netz submitted testimony regarding industry structure, cartel effectiveness, market shares, pass-through, antitrust liability, overcharges and damages, in the preparation and submission of nine expert reports and declarations; she withstood challenges to her conclusions at five depositions. At the merits stage of the proceedings, Dr. Netz responded to 22 reports, rebuttal reports, and sur-rebuttal reports submitted by eight of Defendants’ experts, Professors Rubinfeld, Ordover, Snyder, Willig, Wu, Williams, Howell, as well as Margaret Guerin-Calvert. applEcon supported class counsel regarding discovery, fact and expert witness depositions, hearings, multiple summary judgment motions including two related to the FTAIA, a Daubert challenge, and settlement negotiations.

A settlement for cash payments totaling $563 million and an obligation to cooperate with the plaintiffs in prosecuting the remaining defendants was reached by the class and defendants Chunghwa, LG, Philips, Panasonic, Hitachi, Toshiba, and Samsung SDI. The Court granted preliminary approval of the proposed settlement, pending a final approval hearing. Among indirect purchaser cases, this settlement amount is second only to the LCD case; Dr. Netz was the class’s expert economist in that case, too.

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 Interim Special Master’s recommendation to grant Plaintiff’s Motion for Class Certification.

Read the Interim Special Master’s recommendation to deny defendants’ Motion to Strike Dr. Netz’s expert testimony.

Read the Court’s opinion granting Plaintiff’s Motion for Class Certification.

Read the Court’s opinion granting Preliminary Approval of Class Action Settlement.

Read the Declaration of Mario N. Alioto.

Full Case Name: In re: Cathode Ray Tube (CRT) Antitrust Litigation, MDL No. 1917 (Northern District Court of California)

Year: Complaint dated 2007

Case Number: MDL No. 1917

The post In re: Cathode Ray Tube (CRT) Antitrust Litigation appeared first on applEcon.

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

The post Dial Corp. et al. v. News Corp. et al. (1) appeared first on applEcon.

Testimony from Dr. Janet Netz of applEcon assisted purchasers of cathode ray tube (CRT) televisions and computer monitors in obtaining a recommendation for class certification from the Interim Special Master who wrote: “Having undertaken a rigorous analysis of plaintiffs’ evidence (particularly, the reports of Dr. Netz), the Interim Special Master finds that plaintiffs have satisfied their burden of showing that common questions predominate on proof of the cartel’s price-fixing activities, the direct purchasers’ payment of supra-competitive pricing as a result of the alleged cartel, on proof of common impact on class members, and on proof of damages.”

CRTs were the dominant technology used to display pictures in televisions and computer monitors in the 1990s and early 2000s. The class covers purchases made in 22 states from roughly 1995-2007. Defendants are CRT manufacturers that collectively controlled approximately 90% of worldwide CRT production. Plaintiffs allege that defendants formed a cartel to fix prices to direct purchasers, and that these direct overcharges were subsequently passed on to end-consumers who purchased CRT televisions and monitors.

applEcon has supported class counsel throughout the legal process including during discovery, depositions, and the class certification hearing. Dr. Netz’s testimony relied upon her economic expertise regarding the industry structure, market shares, damages, pass-through, and cartel effectiveness. In addition to Dr. Netz’s written testimony in support of class certification, applEcon examined and responded to the defendants’ expert report. applEcon assisted plaintiffs’ counsel in their opposition to defendants’ Motion to Strike Dr. Netz’s testimony, including an additional Declaration submitted by Dr. Netz. The Interim Special Master also recommended that the judge deny defendants’ motion to strike.

Because applEcon approaches cases by developing a deep understanding of the industry and products at issue, we were able to overcome gaps in data and documentary evidence that resulted from several defendants being defunct and not providing evidence. applEcon’s depth of understanding allowed Dr. Netz to show that U.S. consumers were impacted by the cartel’s actions, although the firms themselves were based in foreign countries.

applEcon takes a comprehensive approach to data analysis: Dr. Netz’s testimony is based upon all the data available, rather than isolated anomalies that might appear convincing; this approach produces robust and reliable conclusions. The Interim Special Master recognized the difference between these two approaches: “As stated above, the Interim Special Master rejects defendants’ reliance on anecdotal testimony of outlier circumstances as a substitute for Dr. Netz’s detailed, record-based analysis.”

Additionally, applEcon was able to show the extreme diversity of products claimed by defendants arose from conflating minor, economically insignificant product variety and economically meaningful product differentiation. applEcon demonstrated that a limited number of product attributes explained the great majority of price variation, and that the cartel’s price fixing practices focused on exactly these attributes. The Interim Special Master agreed: “Dr. Netz quite intentionally and with legitimate empirical reasons controlled only for the major variables of date, application, size and finish.”

Showing that a price structure existed for defendants’ CRT sales was instrumental in proving common impact. A price structure implies that if the cartel is effective, the entire price structure increases relative to the prices that would hold but-for the collusion. In regards to Dr. Netz’s testimony regarding the existence of a price structure, “the Interim Special Master concludes that Dr. Netz’s response is in accordance with sound economic logic. A reading of Dr. Netz’s reports shows that she did not in any way ‘ignore’ data regarding individualized discounts; rather, she demonstrated why they do not invalidate her theory.”

Because the class is made up of indirect purchasers of CRTs, showing common impact on class members involved extensive pass-through studies. CRTs change hands several times as they move through the manufacturing and distribution channel before ultimately being purchased by end-consumers as part of a television or computer monitor; therefore, calculating pass-through throughout the entire chain of distribution was essential. In total, Dr. Netz performed 47 pass-through studies covering all types of at-issue CRT products, being sold by all types of resellers operating at all levels of the distribution channel. In his recommendation against defendants’ Motion to Strike, the Interim Special Master stated that, “Dr. Netz did not reach her conclusion based on a naked assumption. She relied on sound economic theory that pass-through occurs when price increases are significant, industry-wide and not transitory.”

Additionally, Dr. Netz showed that damages could be calculated using common proof. This required proving that valid methods can be employed to determine the prices of CRTs that would have occurred absent the cartel. In his recommendation to certify the class, the Interim Special Master “concludes that Dr. Netz has offered a reliable methodology to assess classwide damages using common proof. Indeed,as discussed above, Dr. Netz has substantively described four detailed and widely-accepted methodologies to calculate the ‘but for price’ that consumers would have paid absent the conspiracy.”

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 Interim Special Master’s recommendation to grant plaintiff’s Motion for Class Certification Part 1.

Read the Interim Special Master’s recommendation to grant plaintiff’s Motion for Class Certification Part 2.

Read the Interim Special Master’s recommendation to deny defendants’ Motion to Strike Dr. Netz’s expert testimony.

Full Case Name: In re: Cathode Ray Tube (CRT) Antitrust Litigation, MDL No. 1917 (Northern District Court of California)

Year: Complaint dated 2007

Case Number: MDL No. 1917

The post CRT Class Certification appeared first on applEcon.

applEcon helped a class of U.S. consumers to obtain settlements totaling $1.082 billion from a cartel of manufacturers of liquid crystal display (LCD) panels. LCD panels are flat video displays used in computer monitors, laptop computers, and televisions. The nine manufacturers that comprised the cartel supplied approximately 98% of the worldwide market for large LCD panels during the period the cartel operated, 1999-2006. Sales of LCD panels at issue to class members were approximately $23.5 billion during this period. Representatives of the cartel’s member companies, including senior executives, met about once a month for years to collude on capacity and output, and to fix prices.

The value of applEcon’s approach to such cases, combining deep knowledge of the industry and information available in the case with strong analytical skills, are highlighted by this engagement. In July 2011, defendants submitted nine separate expert reports all responding to Dr. Netz’s analysis. Given only three weeks to file a reply, applEcon analyzed and responded to these reports with factual and analytical evidence countering their various claims. The depth of applEcon’s knowledge of the industry led class counsel to also rely on applEcon to provide critical assistance on issues related to both the Foreign Trade Antitrust Improvements Act of 1982 (FTAIA) and ascertainability, both of which are primarily legal, as opposed to economic, matters. applEcon’s depth of knowledge also led other firms in related litigation to rely on us for our understanding of the massive volume of disparate data produced by the various defendants.

Over the course of the four and a half year engagement, applEcon supported class attorneys at virtually every stage of this complex case. applEcon submitted nine expert reports and affidavits and helped class attorneys address a wide range of issues, including: class certification, discovery, damages, pass-through of overcharges to indirect purchasers, class de-certification, cartel effectiveness and causation of antitrust harm, class members’ ability to ascertain their claims, a Daubert challenge, a motion to dismiss based on FTAIA, and responses to several additional motions for summary judgment. applEcon was preparing trial testimony when the last of the defendants, AUO, LG, and Toshiba, settled with the indirect purchaser class shortly before trial was to begin.

Suit was brought by representatives of a putative class of U.S. purchasers of products containing large LCD panels, alleging that the cartel caused the prices they paid for LCD products to be above competitive levels, in violation of U.S. antitrust laws. Attorneys for the indirect purchaser class faced a myriad of complications: an LCD panel may change hands several times as it passes from the LCD manufacturer to product manufacturers, distributors, and retailers before an end consumer ultimately takes it home as a component of a monitor, laptop, or television. Proof of antitrust harm required establishing that defendants overcharged their direct customers and that the cartel’s overcharges were passed through the length of the distribution chain resulting in elevated prices for end consumers purchasing products containing LCD panels. Calculating damages to end consumers required quantifying both the overcharge to direct purchasers as well as the pass-through rate.

Because the cartel members were based in foreign countries, class attorneys also faced the challenge of demonstrating that the cartel’s actions had a “direct, substantial, and reasonably foreseeable effect on domestic commerce” in order to meet FTAIA requirements. applEcon drew upon its extensive experience in demonstrating pass-through and common proof of damages as it helped attorneys for the class to meet these challenges. Judge Susan Illston relied on applEcon’s pass-through analyses when she certified the indirect purchaser class, and cited Dr. Netz’s pass-through testimony in her order denying Defendants’ motion to dismiss based on FTAIA, writing that the “increased price of the components caused the prices of finished products in the United States to increase. If that’s not ‘direct,’ it’s difficult to imagine what would be.”

Complications multiplied due to the fact that the conspiracy involved nine defendants based in three foreign countries, with multiple divisions across the globe, some involved in multiple stages of production. For example, Samsung was a producer of both LCD panels and televisions containing LCD panels. Whereas applEcon has long been accustomed to large, complex cases, with mountains of documents and data, we soon discovered that ordinary complications are compounded by multiple defendants, multiple teams of opposing attorneys and expert witnesses, and multiple datasets, each with unique characteristics. We enjoy developing systems that improve the efficiency of our operations, and methods we developed in previous complex litigation allowed us to meet the challenges of this case in a cost-effective manner.

Full Case Name: In Re TFT-LCD (Flat Panel) Antitrust Litigation, No. M:07-cv-01827-SI (Northern Dist. Ct. of California).

Year: Complaint dated 2007, settlement in 2012

Case Number: 3:07-md-01827-SI

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Gamers will retain access to aftermarket peripheral devices for Microsoft’s Xbox 360 video game console as a result of a settlement between Microsoft and Datel. Owners of Datel memory units were surprised to find, that a required software patch for Xbox 360 rendered their Datel gaming peripherals inoperable. Datel deferred introduction of three other devices that would also have been blocked by Microsoft’s software upgrade. Over 20 million Xbox 360 users were left with little alternative to Microsoft for aftermarket controllers, memory units, headsets, and network adaptors similar to those provided by Datel.

Datel alleged that Microsoft monopolized the aftermarket for Xbox 360 peripheral devices, and retained applEcon to perform the case-related economic analyses. This case lies at the intersection of three of applEcon’s strengths: tech industries, fact-intensive preparation, and aftermarket monopolization cases. While the terms of the settlement are confidential, one positive outcome can be readily observed: Datel continues to offer gamers an alternative to Microsoft’s Xbox peripheral devices.

Aftermarket monopolization cases are at the foundation of our expertise: one of our partners laid the economic groundwork for the precedent-setting case ITS v. Kodak, and much of our senior staff supported his testimony in Kodak and other aftermarket monopolization cases. We approached Datel the same way we did Kodak: each case requires acquiring command of a new set of facts, and liability theories tailored to case-specific facts; cookie-cutter analyses can leave gaps that ultimately prove fatal. So while our familiarity with the Kodak framework allowed us to efficiently assemble a compelling analysis that covered most of the bases, the facts in Datel also presented new issues that called for unique analyses. For example, to respond to a claim by Microsoft that its exclusionary conduct in aftermarkets was justified by pro-competitive effects in the primary (console) market, we presented evidence drawn from video game message boards that showed the claimed justification to be inconsistent with real-world consumer behavior.

With five related products at issue, market definition was particularly important in Datel, and called for two of our strengths in tandem: an insistence on mastery of case-specific facts and a deep understanding of technology. Our command of the facts permitted us to identify products that can substitute for products at issue, but it is consumers’ preferences among those products that ultimately determine the boundaries of a product market, and our decades of experience in technology-related cases gave us insight into consumers’ perspectives on substitutability. We defined five relevant antitrust markets that we are confident would have withstood scrutiny at trial and on appeal, had Datel and Microsoft not reached a settlement agreement.

Full Case Name: Datel Holdings Ltd. et al. v. Microsoft Corporation, No. C-09-05535 EDL (Northern Dist. Ct. of California).

Year: Complaint dated 2009, settlement in 2012

Case Number: C-09-05535 EDL

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Unocal influenced California regulators to adopt regulations that, unbeknownst to regulators, conferred monopoly power upon Unocal.  applEcon helped California gasoline consumers to win a settlement of $48 million.

Unocal filed patent applications for certain gasoline formulations, and subsequently proposed that formulations covered by its patent applications be adopted as summertime fuel regulations by the California Air Resources Board (CARB), without disclosing to regulators that the formulations it proposed were covered by patent applications.  The patents were granted, and summertime fuel regulations were adopted that made it difficult for refiners to supply gasoline in California during the summer months without paying Unocal royalties.

Suit was brought by representatives of California gasoline purchasers alleging that Unocal achieved monopoly power in the market for CARB-compliant summertime reformulated gasoline (“summertime RFG”) by abuse of the regulatory process.  applEcon was engaged to support the expert analysis and testimony of Professor Robert Hall regarding market definition, market power, antitrust liability, and the but-for world.  Our thorough grounding in the complex overlapping federal and state regulatory environment and command of the facts provided a sound foundation for Professor Hall’s opinions.  To support his testimony, applEcon commissioned studies by experts in gasoline refining and regulation, and acted as liaison between the economic experts, technical experts, and attorneys.  One study we commissioned showed that gasoline formulations could have been found that would have avoided Unocal’s patents without harm to the environment, and therefore could have served as summertime RFG regulations in the but-for world.

applEcon also provided expert testimony on damages in the Unocal case.

Full Case Name: In Re Reformulated Gasoline (RFG) Antitrust and Patent Litigation, No. MDL No. 05-1671 CAS VBK (U.S. Dist. Ct. for the Central Dist. of California).

Year: 2007

Case Number: MDL CV-05-01671 CAS (VBKx)

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