Plaintiffs sued Amazon.com, Inc., claiming that the company violated the Sherman Act. They contended that Amazon denied customers the “benefits of lower prices and fees” that would arise in a competitive market; and they said Amazon did so by imposing on third-party sellers “Most Favored Nation” policies that cause customers to pay supra-competitive prices.
Plaintiffs’ economics expert Dr. Parag A. Pathak, Ph.D. concluded that Amazon’s anti-discounting policies and practices collectively function as a Platform Most Favored Nation (PMFN) restraint.
According to Pathak, Amazon is the largest online marketplace in the United States, with a market share of around 72% in the Online Retail Marketplaces Market. He added that Amazon’s conduct prevents price competition with other online retailers, which in turn allows Amazon to charge “monopoly referral fees—i.e., the price of connecting merchants and consumers to each other and completing the sales transaction between them.”
Amazon filed a motion to exclude Pathak’s expert testimony.
Economics Expert Witness
Dr. Parag A. Pathak, Ph.D. is the Class of 1922 Professor of Economics at Massachusetts Institute of Technology. He is also a Research Associate at the National Bureau of Economic Research (NBER) and is the founding Director of the NBER’s working group on market design.
Discussion by the Court
Pathak explained that microeconomic modeling shows that, “all else equal, a marketplace with market power (like Amazon) sets higher fees when merchants are constrained by an anti-discounting policy than when they are not.” He said that in this situation, “because merchants cannot discount prices, marketplaces have no reason to discount fees. Instead, the presence of the anti-discounting policy incentivizes the marketplace to increase fees.”
The company challenged Pathak’s methodology, arguing that (1) the model Pathak used is not generally accepted in the field of economics; (2) the model has an extraordinary error rate; (3) the model rests upon unreliable and unfounded assumptions; and (4) the model ignores heterogeneity in sellers’ business strategies. Amazon also contended that Pathak’s regression analyses are unreliable because the data sample is too small, and that his regressions do not show a relationship between fees and prices.
General Acceptance of Economic Model
Amazon contended that Pathak’s methodology, derived from a 2016 paper by Andre Boik and Kenneth S. Corts, is unreliable because the model used is not widely accepted in the field of economics.
The company asserted that there are no standards for applying the model beyond simplified assumptions and it does not reflect a generally accepted consensus in the field of economics.
The Court held that Pathak’s application of the Boik-Corts model to Amazon’s transactional data did not render his opinion unreliable. After all, Amazon did not point the Court to any economic literature describing flaws or errors in the model.
Moreover, Amazon’s contention that Pathak improperly extended the Boik-Corts model to the facts of this case is unavailing. Pathak said that he applied the Boik-Corts model to transactional data provided by Amazon to assess the impact of the company’s anti-discounting policies. He analyzed about 236 million individual items sold on Amazon from May 2017 to July 2023 across 30 different categories.
In sum, Pathak took a peer-reviewed economic model and applied that model to transactional data provided by Amazon.
Error Rate
Amazon asserted that Pathak’s model has a 100% false positive rate because it always concludes that a PMFN is inflating all fees and prices even when analyzing data when no PMFN was in effect.
In his rebuttal report, Pathak explained that the Boiks-Corts model “is not a test of whether a PMFN exists, and it does not return ‘positive’ or ‘negative’ results.”
Pathak stated that he reviewed the record, and the facts supported his conclusion that Amazon’s anti-discounting policies constituted a class-wide PMFN. In his report, Pathak explained the facts that lead him to reach this conclusion.
That Pathak’s model assumed the existence of a PMFN did not automatically render it unreliable. The Court held that Pathak reviewed the facts and explained his basis for concluding that Amazon’s anti-discounting policies act as a PMFN. Thus, Amazon’s argument did not show that the economic model Pathak used is unreliable.
The Model’s Underlying Assumptions
Amazon asserted that Pathak “assumes without justification” that Amazon’s policies and practices constitute a PMFN. Amazon added that Pathak’s opinion of class-wide injury and damages contains too many assumptions and was not supported by real-world evidence.
Pathak evaluated (1) the Price Parity Clause, (2) the Select Competitor Featured Offer Disqualification program, (3) the Marketplace Fair Pricing Provision, (4) Amazon’s Standard for Brands, and (5) the Seller Code of Conduct. He discussed these policies, described how Amazon enforced them, and assessed their impact on merchant and consumer conduct.
The Court held that Amazon’s contention—that Pathak’s model was unreliable because its underlying assumptions did not reflect reality—was unpersuasive.
Heterogeneity in Sellers’ Business Practices
Amazon contended that Pathak’s methodology did not account for “focal point” pricing—i.e., a practice in which sellers commonly set prices ending with certain values such as $0.99.
Focal point pricing occurs when retailers set prices at “focal points,” such as prices ending in 99 cents or a round number.
Pathak made it clear in his rebuttal report that “The possibility of focal point pricing behavior does not affect [his] conclusion that all or virtually all class members were harmed by the conduct. This is because virtually all class members made enough purchases to have overpaid on at least one of them, even if they were not harmed on purchases of focally-priced items of merchandise.”
Thus, Pathak accounts for focal point pricing and reasonably explains why focal point pricing does not impact his determinations.
Reliability of Pathak’s Regressions Analyses
Amazon contended that Pathak’s regression analyses are unreliable because they rely on a small, unrepresentative data sample.
Pathak studied how Amazon’s fees affected merchandise prices by analyzing price changes following Amazon’s partial fee reduction in 2019 for four product categories: Baby, Health & Personal Care, Beauty, and Furniture. He stated that the results from his analyses confirmed the model’s predictions: lower fees lead to lower prices. He used a difference-in-difference econometric model to compare the prices of individual goods sold on Amazon to other online marketplaces like Walmart. Pathak said that his analysis “supplements and supports the findings of the economic model.”
In 2019, Amazon lowered its fees in four categories of products: Baby, Health & Personal Care, Beauty, and Furniture. Pathak said that this change applied to a subset of goods within these categories. He explained that he analyzed these fee changes, separately and collectively, to empirically assess whether the change in fees had an impact on product pricing.
In his rebuttal report, Pathak emphasized that he did not “cherry-pick subsets of the data.” He said that he “analyzed all available prices in every category where a fee reduction occurred.”
Moreover, whether the results are statistically significant is testable. Pathak noted that he tested for statistical significance using measures such as the t-statistic. There is nothing to suggest that Pathak selected the data in a biased manner; instead, he appears to have analyzed all the data available to him. Moreover, the Court held that Pathak performed these regression analyses on available empirical data to corroborate the conclusion of his economic modeling.
Held
The Court denied Amazon’s motion to exclude testimony of Dr. Parag A. Pathak, Ph.D.
Key Takeaway:
The Daubert inquiry is flexible, and the listed factors do not apply equally to every type of expert testimony. Here, Pathak’s conclusions are capable of being tested. And his opinions “are supported by rational explanations which [a] reasonable [person] might accept, and none of his methods strike the court as novel or extreme.”
Case Details:
| Case Caption: | De Coster Et Al V. Amazon.Com Inc |
| Docket Number: | 2:21cv693 |
| Court Name: | United States District Court, Washington Western |
| Order Date: | July 01, 2025 |
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