Dial Corp. et al. v. News Corp. et al.
Antitrust, monopolization, damages analysis, class certification
U.S. District Court for the Southern District of New York
On the first day of its trial for monopoly maintenance, News Corp agreed to pay $280 million to settle a suit brought on behalf of a class of consumer packaged goods companies against News Corp’s subsidiary News America Marketing (“News”).; News also agreed to modify its allegedly exclusionary conduct. applEcon’s Professor Jeffrey MacKie-Mason was the sole expert economist representing Plaintiffs in this matter; he supported class counsel throughout the case, including issues identification, discovery, class certification, depositions, liability and damages disclosures, opposition to summary judgment, and preparation for trial.
News buys exclusive access to at-shelf space from retailers, and uses its access to supply at-shelf advertising and promotions to consumer packaged goods manufacturers, including Dial and Heinz. For News’s competitors, access to stores for the purpose of placing ads is an essential input. Plaintiffs alleged 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 acts excluding competitors from access to stores, including using cash guarantees to derail competitors’ contracts with retailers, entering into long-term exclusive contracts with retailers, staggering the termination dates of its contracts with retailers, entering into anticompetitive agreements with competitors, hacking into a competitor’s computer, and disparagement. In addition to its settlement payment, News agreed not to sign retailers to contacts longer than 2½ years, unless retailers request such contracts in writing.
Professor MacKie-Mason researched, wrote, and submitted expert reports in support of class certification, liability, damages, and rebuttals of the expert reports of three prominent expert economists submitted on behalf of News; a declaration in opposition to Defendants’ summary judgment and Daubert motions; and four other submissions to the Court related to damages and class membership, all within the brief span of 2¼ years.
News argued that substantial price variation across customers and individually-negotiated prices 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… Plaintiffs' evidence suggests that prices are systematic and, thus antitrust injury is measurable with common proof.”
Finding a benchmark in this case for the calculation of overcharges was challenging due to the fact that News’s alleged monopoly began virtually with the inception of the industry. Professor MacKie-Mason addressed critical damages issues early, in his report in support of class certification. The Court cited Professor MacKie-Mason in support of its finding 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 the market.” Professor MacKie-Mason resolved this difficulty 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.
Six weeks before trial was to begin, the Court denied News’s motion for summary judgment and its motions in limine to exclude the testimony of Professor MacKie-Mason and a marketing expert; the experts’ testimony was left intact by the Court. In denying News’s motion for summary judgment, the Court cited Professor MacKie-Mason’s implementation of the DOJ’s SSNIP test, among his other evidence, in finding that “[t]ogether, Plaintiffs' evidence supplies an ‘ample factual basis’ on which a jury could conclude that the relevant product market consists of pre-checkout third-party ISP.” The Court also found that “Plaintiffs present ample evidence that News Corp. intended to use their exclusive retailer contracts to … exclude rivals”, and reiterated its earlier dismissal of News’s request to reject Professor MacKie-Mason’s damages benchmark.
Professor MacKie-Mason and applEcon helped class plaintiffs to navigate a welter of complex issues raised by News and its three experts, to achieve a settlement that benefitted both class members and the competitive process. 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 readily handle heavy document production and large complex datasets efficiently, and the ability to communicate technical issues credibly, concisely, and clearly.
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