Chocolate Companies Engaged in Price Fixing – Econometrics Expert Witness


 

Econometrics Expert Witness

In re: Chocolate Confectionery Antitrust Litigation United States District Court, M.D. Pennsylvania.December 7, 2012 90 Fed. R. Evid. Serv. 36

Background:

Direct purchasers of chocolate candy products brought an action against several chocolate producers, asserting antitrust claims under Section 1 of Sherman Act and violations of state antitrust and consumer protection statutes. This is based on allegations that the producers conspired to implement three price increases on chocolate during a five-year period.

Econometrics Expert:

Plaintiffs offered the testimony of an econometrics expert witness. The expert proceeded to use econometric models to demonstrate class-wide impact of the price increase. He also used them to quantify the extent of the overcharge on a class-wide basis. The econometrics expert had a Ph.D. in statistics and nearly thirty years of teaching experience at the college level. He has authored or co-authored six textbooks in the field of statistics. Four of which continue to be used in the academic setting and two of which are beyond their tenth edition. Hundreds of colleges and universities have utilized one or more of his textbooks. He has engaged in litigation consulting for about thirty-five years. Including the provision of expert reports or testimony in fifty antitrust cases.

Daubert challenge:

The Defendants acceded to the expert’s proficiency in the field of statistics, but not in the field of econometrics. Defendants argued that the expert’s class-wide analysis of the effect of alleged price-fixing in the chocolate confectionery industry suffers from infirmities. Specifically, the defendants’ expert criticized the plaintiff expert for relying upon price information from a single customer. The defense expert opined that the plaintiff’s expert analysis fails to consider the wide variations in price paid by Defendants’ customers and, therefore, inaccurate.

Court analysis:

With regard to the defense’s challenge, the court concluded that the plaintiff expert is properly qualified as an expert in both econometrics and statistics, mainly based upon his educational background and his extensive experience. The expert employed a multiple regression analysis to establish class-wide antitrust injury. Multiple regression analysis is the comparing of variables to determine the influence that one variable, the independent or explanatory variable, has on another variable, the dependent variable. The plaintiff expert used price as the dependent variable and shows the impact of various explanatory variables on price. At the class certification hearing, the plaintiff expert reviewed several models that he constructed, demonstrating consistent and statistically significant overcharges.

With regards to the accuracy of the analysis, the court concluded that the plaintiff expert has properly accounted for price variations for several reasons:

First, to the extent possible, the expert used the list prices provided by Defendants. However, list prices are not available for all defendants for the entire period in question. Consequently, the expert utilized price data from a “typical” customer, which is one of the largest purchasers of relevant product. The expert used this data because he was able to secure it in relation to all defendants for the years 1993 through 2007, a longer time frame than any other available transactional data.

Second, The expert established that the data is representative of the class members because “the median price [paid by] all class members is almost identical to the penny to this company’s median price.”

Third, when questioned by the court, the expert credibly testified that he conducted extensive research to determine that this company was the best example of a typical customer. The court finds that although there are limitations to the expert’s analysis. They are not fatal to admissibility under Rule 702. The court found that the expert’s analysis provided reliable, relevant, and reasonable support for the assertion that damages can be estimated and quantified on a class-wide basis.

About The Author

Albina Gasanbekova, J.D., LL.M. is an International Disputes Associate whose practice focuses on international arbitration and federal litigation of contract disputes, enforcement of arbitral awards, and jurisdictional issues.