Distribution, Competition, and Antitrust / IP Law

Archives for October 2015

Plaintiffs’ Antitrust Experts Are Dauberted More Often

According to a new study by the Law & Economics Center at George Mason University (as reported in MLex), 59% of the time, antitrust defendants succeeded on some aspect of their Daubert motions in class action cases, while antitrust plaintiffs won their challenges only 38% of the time.

These rates compare with 50% for defendants across case types and 40% for plaintiffs across case types.

The difference between the figures for plaintiffs is quite small and may be statistical noise.  But it does appear that antitrust defendants are more successful at Dauberting plaintiffs’ experts than are defendants overall.

This is a somewhat surprising and interesting finding, and I wonder what causes the difference.  It seems to me the possibilities are:

  • There is some institutional bias against antitrust plaintiffs as opposed to other plaintiffs.  This seems unlikely;
  • Either the class action rules, the antitrust laws, or both just make it harder for the typical antitrust plaintiff than the typical plaintiff; or
  • Antitrust plaintiffs’ experts do a worse job on average than the typical antitrust defendant’s expert — and also do worse on average than the typical plaintiff’s expert.

I lean to the third possibility, based on anecdotal evidence and speculation.

Ninth Circuit Rejects Irrational Market Allocation Claim

In Stanislaus Food Products Co. v. USS-Posco Industries, No. 13-15475 (9th Cir. Oct. 13, 2015), the Ninth Circuit affirmed a defense summary judgment in a case alleging that U.S. Steel and its joint venture conspired to allocate the sale of “hot band steel” in the western United States to the joint venture.

The evidence of a market allocation scheme was circumstantial. The problem for the plaintiff was that U.S. Steel had nationwide supply contracts with all of the major tin can manufacturers (consumers of hot band steel). Under these contracts, U.S. Steel sells tin mill products F.O.B. U.S. Steel’s mill, which means that the customer selects where U.S. Steel is to ship the products and pays for shipping costs. As a result, “the price and other terms are negotiated without U.S. Steel knowing whether a customer will request items be sent, say, to California or to New York.” This “geographic neutrality” is a significant practical obstacle to the viability of the alleged conspiracy, because in order not to compete on price in the Western U.S., “U.S. Steel would need to stop competing on price nationwide or refuse customers. Both options risk losses to U.S. Steel’s bottom line and make little economic sense.”

In other words, the alleged scheme would not be rational “unless U.S. Steel had little competition outside of the western United States or the potential payoff through ownership of [the JV] was likely to be significant.” The court found that U.S. Steel faced significant competition, making the alleged agreement implausible. The plaintiff’s proffered circumstantial evidence of an agreement (much of which the Ninth Circuit found to be ambiguous at best) was insufficient to overcome this finding of implausibility.

The case reinforces the requirement that allegations of a conspiracy must tend to exclude the possibility that the alleged conspirators acted independently.

The NCAA Ruling : How Far Should Courts Go In Redefining Market Rules?

English: National Collegiate Athletic Associat...

(Photo credit: Wikipedia)

In O’Bannon v. National Collegiate Athletic Association, Case No. 14-16601 (9th Cir. Sept. 30, 2015), the Ninth Circuit applied the Rule of Reason to the NCAA’s amateurism rules, and concluded that while the NCAA can ban cash compensation to student athletes for the use of their names, images and likenesses (“NILs”), it cannot bar member colleges from offering full “cost of attendance” scholarships.(*)

Much has already been written about this opinion – its application of the Rule of Reason to NCAA rules; its finding that the amateurism rules have anticompetitive effects in the college education market; and its determination that, while promoting amateurism is pro-competitive – because it tends to increase consumer demand for college sports, and may marginally help integrate academics with athletics – there is a less-restrictive way to achieve the same result.

The interesting part of the opinion is what it portends for future cases – including outside the area of college athletics. Some amici argued that the Ninth Circuit’s approach would open the floodgates to numerous challenges to organizations’ rules, and that an antitrust court’s function is not “to tweak every market restraint that the court believes could be improved.”

Acknowledging this concern, the Ninth Circuit wrote:

We agree . . . that, as a general matter, courts should not use antitrust law to make marginal adjustments to broadly reasonable market restraints . . . .

in holding that setting the grant-in-aid cap at student-athletes’ full cost of attendance is a substantially less restrictive alternative under the Rule of Reason, we are not declaring that courts are free to micromanage organizational rules or to strike down largely beneficial market restraints with impunity. Rather, our affirmance of this aspect of the district court’s decision should be taken to establish only that where, as here, a restraint is patently and inexplicably stricter than is necessary to accomplish all of its procompetitive objectives, an antitrust court can and should invalidate it and order it replaced with a less restrictive alternative.

Id. at 55 (emphasis in original). It’s a good thing the Court was so explicit about its intentions. But time will tell whether the Court’s discussion is truly strong enough to prevent future judicial micro-management of “broadly reasonable” market restraints.

(*) The NCAA already allows “grant in aid” scholarships for tuition and fees, room and board, and required course-related books. “Cost of attendance” includes these items ask well as non-required books and supplies, transportation, and other expenses related to attendance at the institution. The difference between a grant in aid and the cost of attendance is a few thousand dollars at most schools, so striking down the scholarship limit will have little practical effect.

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