In re: Cathode Ray Tube (CRT) Antitrust Litigation
antitrust, damages analysis, class certification
U.S. Northern District of California
Testimony from Dr. Janet Netz of applEcon assisted purchasers of cathode ray tube (CRT) televisions and computer monitors to obtain cash settlements totaling $563 million from seven CRT manufacturers. applEcon supported class counsel throughout the legal process, submitting nine expert reports related to class certification, antitrust liability, damages, and other issues, and helping counsel with discovery, depositions, hearings, responses to motions, and settlement negotiations.
CRTs were the dominant technology used to display pictures in televisions and computer monitors in the 1990s and early 2000s. The defendants were CRT manufacturers that collectively controlled approximately 90% of worldwide CRT production. Plaintiffs allege that the defendants formed a cartel to fix prices to direct purchasers, including television and monitor manufacturers, and that these overcharges on CRTs were subsequently passed on through the distribution channel to class members, who purchased CRT televisions and monitors in 22 states of the US during roughly 1995-2007. Like the LCD case, in which Dr. Netz also testified, this case was complicated by multiple defendants, based in foreign countries, some of which manufactured both the components at issue (CRTs) and final goods (e.g. CRTs and televisions). Unlike the LCD case, only one defendant in the CRT case submitted a guilty plea.
Certification of the CRT class presented several new challenges. The conspiracy began 20 years ago; document production was not made by cartel members that no longer existed;CRT demand was declining during the damages period, causing prices to fall, which created the opportunity for Defendants to claim that they did not “raise price”. Despite evidence that the cartel met at least 100 times to discuss market conditions, and set approximately 1,800 target prices, the defendants argued that class-wide analysis was impossible due to the nature of the industry: highly differentiated products, individualized customer negotiations, falling prices, and the multiple paths taken by different CRTs through the distribution channel.
Based on standard economic theory, statistical evidence, and a deep understanding of the industry and the practices of the cartel revealed by documentary evidence, Dr. Netz testified during class certification that CRTs prices manifested a price structure (e.g. larger models are priced higher than similarly-equipped smaller models), which enabled the cartel to cause all of its CRT prices to be above competitive levels by setting target prices for a subset of all CRTs. She demonstrated to the Court’s satisfaction that, contrary to the defendants’ claims, a small number of fundamental product attributes explained the great majority of CRT price variation. She then showed that the cartel’s price-fixing practices were keyed to those fundamental attributes.
As the Interim Special Master explained Dr. Netz’s price structure theory, “all of those individualized discounts started from an artificially increased platform… but for the cartel, the customers who obtained various price discounts would have paid even lower prices. [emphasis in original]. The Interim Special Master concludes that Dr. Netz's response is in accordance with sound economic logic… she did not in any way ‘ignore’ data regarding individualized discounts; rather, she demonstrated why they do not invalidate her theory.” The defendants filed a motion to strike this, and other testimony by Dr. Netz. The Interim Special Master found her testimony to be reliable, and rejected “defendants’ reliance on anecdotal testimony of outlier circumstances as a substitute for Dr. Netz’s detailed, record-based analysis”.
The Interim Special Master concluded that “Dr. Netz has offered a reliable methodology to assess classwide damages using common proof”, finding that she “substantively described four detailed and widely-accepted methodologies to calculate the ‘but for price’” that would have been paid by direct purchasers(such as television and monitor manufacturers) in the absence of the cartel.
To determine whether overcharges paid by direct purchasers were passed through the distribution channels to purchasers of CRT televisions and monitors in the United States, Dr. Netz performed 47 econometric analyses of pass-through for class certification. Following applEcon’s standard practice, the data she used in her pass-through studies, representing tens of millions of transactions and 14 retailers operating at all levels of the distribution channel over 17 years, encompassed all of the data in usable form that were available. She concluded that it is possible to quantify the pass-through of overcharges using common evidence, and that virtually all class members suffered common harm in the amount of at least 100% of the overcharge paid by direct purchasers. Dr. Netz performed additional analyses during the merits stage as more data became available.
After conducting a “rigorous analysis”, the Interim Special Master concluded that “the proposed classes meet the requirements of Rule 23(a) and 23(b)(3).” The Court found the Interim Special Master’s reports to be “in all respects well-reasoned, thorough, and correct”, and the Court adopted “the ISM's summaries and discussions of the facts and the parties’ contentions in full”, granted the plaintiffs’ motion to certify the class, and denied the defendants’ motion to strike Dr. Netz’s testimony.
In addition to addressing class certification, Dr. Netz submitted testimony regarding industry structure, cartel effectiveness, market shares, pass-through, antitrust liability, overcharges and damages, in the preparation and submission of nine expert reports and declarations; she withstood challenges to her conclusions at five depositions. At the merits stage of the proceedings, Dr. Netz responded to 22 reports, rebuttal reports, and sur-rebuttal reports submitted by eight of Defendants’ experts, Professors Rubinfeld, Ordover, Snyder, Willig, Wu, Williams, Howell, as well as Margaret Guerin-Calvert. applEcon supported class counsel regarding discovery, fact and expert witness depositions, hearings, multiple summary judgment motions including two related to the FTAIA, a Daubert challenge, and settlement negotiations.
A settlement for cash payments totaling $563 million and an obligation to cooperate with the plaintiffs in prosecuting the remaining defendants was reached by the class and defendants Chunghwa, LG, Philips, Panasonic, Hitachi, Toshiba, and Samsung SDI. The Court granted preliminary approval of the proposed settlement, pending a final approval hearing. Among indirect purchaser cases, this settlement amount is second only to the LCD case; Dr. Netz was the class’s expert economist in that case, too.
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