Distribution, Competition, and Antitrust / IP Law

Archives for August 2013

Market Clearing in the Legal Education Market

According to the Law School Admission Council, the following data represent ABA applicants and applications for each of the past three falls:

three-year-aba1

three-year-aba2

The LSAC reports that “[a]s of 08/08/13, there are 385,358 Fall 2013 applications submitted by 59,426 applicants. Applicants are down 12.3% and applications are down 17.9% from 2012.” 

It’s surprising that the figures haven’t gone down further.  That’s probably due to various market imperfections, including incomplete information available to applicants about market conditions.

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On How to Cross-Examine Expert (Economist) Witnesses in an Antitrust Trial

English: W. S. Gilbert's illustration for &quo...

English: W. S. Gilbert’s illustration for “Now, Jurymen, hear my advice” from Gilbert and Sullivan’s Trial by Jury (Photo credit: Wikipedia)

Having recently observed the cross-examination of an expert economist at an antitrust jury trial, I thought I’d note some observations and conclusions.

In antitrust cases, economists play an important, if not critical, role. On the liability side, they help define the relevant markets, and assess whether anticompetitive conduct occurred. On the damages side, they are largely responsible for quantifying damages (or the lack thereof).

Many lawyers deal with expert witnesses, but they are surprised at the detail and extent of antitrust economists’ expert reports. An antitrust economist – supported by many staff members – may spend hundreds or even thousands of hours on a large antitrust case, and may issue 2-4 expert reports, each of which is over 50 pages long. Often these reports relate the operation of complex regression models and are difficult to understand and explain. Lawyers spend many hours helping economists prepare these reports – or working out deposition cross-examination questions to attack them.

Yet, despite all these hours, the complexity of the economic models, and the pages and pages of reports, in a jury trial it all comes down to perhaps 2-3 hours of cross-examination. And because antitrust jury trials happen somewhat infrequently, we don’t often get to see in practice what constitutes an effective cross-examination, and what doesn’t.

Based upon my recent observations, I suggest that the following are not particularly effective approaches:

  • “Death by a thousand (or even a hundred) calculation cuts.” In pages and pages of complex reports, even the best economists are likely to make small arithmetical or mathematical errors. But if these don’t materially affect the economist’s ultimate conclusions, I think the jury is likely to think to itself: “so what; everyone makes little mistakes.” That’s particularly true when the economist is presentable and has a good demeanor. Jurors are smart enough to discount little errors, and can see the forest despite the trees. I’m not saying don’t point out any small errors, but it’s probably not worth the limited time to itemize many of them.
  • Dwelling on small mistakes of fact. Similar to the above point, in the course of preparing a lengthy expert report, an economist is likely to miss some facts in the record, or misunderstand or mischaracterize others. But if they are not large errors, I think the jury is unlikely to care.
  • Trying to get the economist to admit that his/her predictions don’t have a “sufficient” confidence level, that his/her economic model didn’t include several possible predictive variables, etc. Generally speaking, these criticisms are too deep in the weeds. The jury doesn’t care.
  • Getting the economist to agree with many premises without explaining their significance to the jury — as a way to set up your own expert’s direct examination.  I think this approach will likely be unintelligible, at least in large measure.

(I’m assuming here we’re talking about trial. Some of the above points may carry weight at a Daubert hearing.)

So what does work for an effective cross-exam? I suggest the following:

  • Pointing out fundamental mistakes or misapprehensions about record facts. If the economist missed something important, and his or her model therefore does not correspond well to reality, that’s a big deal the jury can and will understand.
  • Pointing out fundamental economic assumptions that have questionable support and that substantially bias an economic model in one direction or another.
  • Personal or professional bias. Usually it doesn’t exist (or at least it is difficult to establish), but if it can be established, it’s jury dynamite.

In short: boil it all down to the absolute fundamentals.  And then boil it down again.

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Single-Brand Market Claims Are Not Dead

A photo of the Logo of the National Football L...

A photo of the Logo of the National Football League (NFL) (Photo credit: Wikipedia)

Modern antitrust law’s focus on inter-brand competition has made it much more difficult to plead and prove single-brand market claims. The law’s concern with inter-brand competition is so strong that some observers have all but written off such claims as essentially impossible to maintain.

But that would be a mistake. Proper, careful pleading in appropriate cases can at least take single-brand claims past a motion to dismiss.

For example, on August 2, the Northern District of California denied a motion to dismiss challenging antitrust claims arising out of the National Football League’s exclusive license deal with Reebok International, Inc. See Dang v. San Francisco Forty Niners, et al., Case No. 5:12-CV-5481 (EJD) (August 2, 2013) (Davila, J.). The court held that the putative class plaintiffs had adequately alleged a relevant market for the licensing of the trademark, logos, and other emblems of individual NFL teams for use in/on clothing.

True, the court noted that the plaintiffs had alleged “a market consisting of the intellectual property of at least thirty different and competing professional football teams as well as the intellectual property owned by the NFL itself.” But in doing so, it was rejecting the defendants’ argument that the market was “sports apparel or apparel in general.” Because the NFL decides which teams are its members, NFL-branded products in some sense constitute or belong to a single brand.  As the court wrote, “the logos and trademarks of the NFL and NFL teams may very well be the products themselves that consumers seek topurchase” (emphasis added).

The court in Lima LS PLC v. PHL Variable Ins. Co., Case No. 3:12-cv-1122 (WWE) (July 1, 2013) (Eginton, J.), was even clearer that a single-brand product market can be cognizable. There, the plaintiff advanced a Kodak-type aftermarket lock-in claim and alleged that the defendant insurance company monopsonized, or attempted to monopsonize, the secondary market for its own life insurance products. (Full disclosure: I worked on the briefs for the plaintiff.)

It is certainly true that it is not easy to prevail upon these sorts of claims — but it is not in all cases impossible.

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