ABA Section of Antitrust Law: Class Action Fundamentals for Antitrust Litigators May 5, 2016 Robin Cantor, PhD Managing Director Berkeley Research Group Washington, D.C.

THE ROLE OF ECONOMICS AND THE ECONOMICS EXPERT

Antitrust Law: Prohibits Behavior to Maintain or Increase in Monopoly Power That Results in Inefficient Outcomes Behavior of Interest: Monopolization vs. Competition Restrictions in consumers’ ability to substitute alternative products 3

Comparison of Monopoly and Competition 4

Monopolization: Maintain or Increase Market Power Increase inelasticity of demand Raise rival’s costs (impair ability to respond to price increases) 5

Typical Antitrust Class Action Claims Collusion and horizontal agreements Tacit collusion Conditional pricing/rebates Vertical agreements Exclusive dealing Tying/bundling Market foreclosure/delay 6

Assignment: Analyze whether impact and damages can be proven on a class-wide basis Analysis based on common proof that economic conditions are consistent with the challenged conduct Challenged conduct affected all or nearly all of the class members in a directionally consistent way Damages can be reliably measured in the aggregate (and apportionment can be a factor in reliability) 7

Predominance and All or Nearly All Standard Common Impact: place theory in context of observed information Liability and common impact: fact/inference of antitrust violation and impact Extract higher prices or higher profits and this impacts all or nearly all the class Theory of the actual and but-for worlds Damages: presume challenged conduct is true Manageable or not? 8

What Can the Economic Expert Contribute in the Class Certification Stage? Theory of liability and its application to putative class members Defining and ascertaining the class Testing the approach to demonstrate common proof Not a test of competing models but rather how cohesive is the class under the model of impact? Evidence-based analysis of industry and case facts Significant needs for discovery and research (identify evidentiary requirements) Assessment of the efficacy of certain case strategies (e.g., bifurcated discovery) 9

What Can the Economic Expert Contribute in the Class Certification Stage? (cont.) Key document identification (industry, marketing, financial, etc.) and issue typology Deposition issues/questions Identification of manageability issues Uninjured class members Conflict in class (adequacy) Ascertainability 10

RIGOROUS ANALYSIS OF ECONOMIC THEORIES AND COMMON PROOF

Proving Elements of the Antitrust Claim Plausible in Theory and Rational Fit to the Facts: Economic principles, model, and data (operating within the boundaries of accepted paradigms) Do the conditions of the economic model fit the facts? Capable of Common Proof: –Positive analysis of industry characteristics Fungibility and differentiation of products (product market definition) Degree of supply-side substitution across differentiated products Geographic scope of the market (geographic market definition) 12

Proving Elements of the Antitrust Claim (cont.) Barriers to entry Industry/Cost structure Market power (market share, seller concentration metrics, stability) Incentives to cheat Levels and trends in prices (price announcements) Pricing strategies and operation (contracts)/price dispersion/visibility of pricing cues Levels and trends in revenues/profitability (margins, shipment patterns) Transaction costs Countervailing power of consumers 13

Proving Elements of the Antitrust Claim (cont.) Hypothesis Testing with Observed Data Behavior inconsistent with self-interest Correlation analysis Benchmarking Yardstick Before and after Regression and pricing analysis 14

Issues: The influence of treble damages Investigation of competitive reasons for and competitive outcomes from the challenged conduct Isolating the impact and damages of the challenged conduct from other market-wide factors not subject to the defendants’ control Establishing but-for prices (Average metrics, Non-price preferences, Benchmarks) Dispersion of the observed data Distribution of the individual effects/investigation of subclasses Resolving admissibility of evidence rather than weight of the evidence Is the damages model workable? (data availability, results consistent with theory, acceptable statistical results [fit, significance], and interpretation) 15

QUESTIONS? Robin Cantor, PhD Managing Director Tel: (202)

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