Expert Witness Profiler

Tag: antitrust

  • Economics Expert’s Statistical Model Survives Daubert Challenge in NCAA Volunteer Coach Case

    Economics Expert’s Statistical Model Survives Daubert Challenge in NCAA Volunteer Coach Case

    The NCAA is an association whose members are colleges and universities competing in intercollegiate athletics. The NCAA governs student athletic competition at its member schools.

    NCAA schools are divided into three divisions: Division I, Division II, and Division III. Division I schools, which are at issue in this litigation, generally “manage the largest athletic budgets and offer the highest number of athletics scholarships.” Coach compensation is the largest athletics expense for NCAA Division I schools.

    NCAA bylaws limit the number of coaches that Division I schools can hire in a given sport. Prior to 2023, Division I programs other than basketball and men’s bowl-division football were permitted to hire a certain number of “unrestricted coaches,” who had no restrictions on compensation, plus one or two “volunteer coaches.” The bylaw at issue here, NCAA Bylaw 11.01.06 (hereinafter “Volunteer Coach Bylaw” or “the Bylaw”), defined a “volunteer coach” as “any coach who does not receive compensation or remuneration” from the school’s athletics department.

    Following the repeal of the Volunteer Coach Bylaw, effective July 2023, the volunteer coach designation was eliminated and the number of unrestricted coaches was increased, typically by the number of volunteer coaches allowed under the prior rule. For instance, programs previously permitted one volunteer coach were allotted one additional paid coach.

    Plaintiffs brought this putative class action alleging that the Volunteer Coach Bylaw violated § 1 of the Sherman Act. The proposed class consists of “[a]ll persons who, from March 17, 2019, to June 30, 2023, worked for an NCAA Division I sports program other than baseball in the position of ‘volunteer coach,’ as designated by NCAA Bylaws.” 

    Dr. Orley Ashenfelter created a statistical model to estimate the damages suffered by the members of the proposed class. Defendants, however, sought to exclude all evidence from this expert.

    Economics Expert Witness

    Orley C. Ashenfelter is an economist specializing in labor economics, antitrust policy, and the economic analysis of labor markets. He is the Joseph Douglas Green 1895 Professor of Economics, Emeritus, at Princeton University, where he also serves as a Senior Scholar in Economics.

    Ashenfelter holds a Ph.D. in Economics from Princeton University and a B.A. from Claremont McKenna College. His professional experience includes directing Princeton’s Industrial Relations Section and serving as President of multiple economic associations, including the American Economic Association, the Society of Labor Economists, and the American Law and Economics Association. He has also held editorial positions at the American Economic Review and Journal of Wine Economics.

    Get the full story on challenges to Orley Ashenfelter’s expert opinions and testimony with an in-depth Challenge Study. 

    Discussion by the Court

    Orley Ashenfelter

    To formulate his model, Ashenfelter relied upon wage data and other documentation from hundreds of NCAA Division I schools, focusing on those that expanded their coaching staff beyond the prior limits on the number of unrestricted coaches following the repeal of the Volunteer Coach Bylaw.

    He focuses on this subset of schools because they “provide the best currently-available evidence of what a competitive market will look like” in the absence of the repealed Bylaw. The model uses actual coach salary data following the Bylaw repeal as a “benchmark” to estimate the “but-for” compensation class members would have received. “But-for” analysis refers to the practice in antitrust cases of calculating classwide damages based on what class members’ economic position would have been absent the alleged antitrust violations (i.e., in the world that would have existed but for the alleged violation).

    Ashenfelter’s analysis proceeds in two steps. In the first step, Ashenfelter categorizes sports programs according to how many unrestricted coaches each program was permitted to have under NCAA rules beginning July 1, 2023 (i.e., following the repeal of the Bylaw).

    In the second step, Ashenfelter produces an estimate of the compensation class members would have received in the “but-for” world. 

    Defendant’s Objections

    In the instant case, discovery is ongoing and Ashenfelter is still receiving new data and updating his analysis, which indicates that a full Daubert analysis is “premature” at this stage of the proceedings.

    Ashenfelter’s Model Fails to Control for the Experience and Skill Level of Coaches

    Defendant argues that Ashenfelter’s report is nonetheless inadmissible because it fails to account for several key factors. First, Defendant contends that Ashenfelter’s model fails to control for the experience and skill level of coaches because (1) his calculations did not incorporate experience level as a variable, and (2) he did not address potential selection bias in the sample of additional paid coaches hired after the bylaw repeal, who could have higher experience levels and therefore warrant higher wages. The Court clarified that these arguments are factually unfounded, as Ashenfelter’s analysis does account for experience using both pay ranking within the coaching hierarchy and age as proxies for experience.

    Second, Defendant argues that Ashenfelter “excluded evidence from schools that did not add paid coaching positions after the bylaws were amended.” Again, this argument is unfounded.

    Ashenfelter’s Analysis is Based Around Groupings of Dissimilar Sports

    Finally, Defendant argues that Ashenfelter’s analysis is based around groupings of dissimilar sports and “tries to estimate market rates of pay for coaches in one sport by using salaries for coaching in other sports that are determined by different supply and demand conditions.” The Court ruled that this argument mischaracterizes Ashenfelter’s analysis. While the calculation of the step-down differential at step one uses groupings of sports based on how many coaches the NCAA permits a school to hire, the damage calculation at step two uses actual salary data from each sports program at each school and therefore accounts for differences across sports.

    To the extent that Defendant thinks Ashenfelter’s analysis inadequately accounts for the variables discussed above, that is not a basis for exclusion under Daubert, but rather goes to the weight of the evidence.

    It is undisputed that Ashenfelter possesses extensive experience and qualifications in the field of labor economics and that he based his analysis on the review of reliable documentation produced by NCAA Division I member schools. Regression analysis based on a “benchmark” or “yardstick,” like that employed by Ashenfelter, is a well-established method of calculating class-wide antitrust impact. 

    Held

    The Court denied Defendant’s motion to exclude the testimony of Orley Ashenfelter.

    Key Takeaway:

    The ruling reinforces the use of established economic methodologies, like benchmark regression analysis, in antitrust cases, and addresses the standard for admissibility of expert testimony under the Daubert standard.

    Case Details:

    Case Caption: Shannon Ray v. NCAA
    Docket Number: 1:23cv425
    Court: United States District Court, California Eastern
    Order Date: March 10, 2025
  • Economics Expert Witness’ Opinions Cannot be the Basis for Finding Antitrust Injury 

    Economics Expert Witness’ Opinions Cannot be the Basis for Finding Antitrust Injury 

    In this antitrust action, separate Plaintiff groups of users and advertisers sued Meta Platforms, Inc. (Meta), for alleged anticompetitive conduct under the Sherman Act and California state law in connection with the Facebook social-networking app.

    The user group, headlined by named Plaintiffs Maximilian Klein, Sarah Grabert, and Rachel Banks Kupcho, alleged that Meta illegally acquired and maintained a monopoly in the “personal social network services” (PSNS) market “through repeated misrepresentations over its data collection and use practices” that “deprived its competitors of the ability to compete.” The user Plaintiffs have asked to certify a class of all persons in the United States who used a Facebook profile between December 2016 and December 2020. 

    The certification request rises or falls on the validity and reliability of the opinions of the user Plaintiffs’ economist, Nicholas Economides, with respect to antitrust injury and other elements required for proof of a monopolization claim. Meta asked to exclude the opinions of Dr. Economides under Federal Rule of Evidence 702 and related cases.

    Meta illegally acquired and maintained a monopoly in the PSNS market

    The user Plaintiffs’ main allegation is that Meta illegally acquired and maintained a monopoly in the PSNS market by deceiving users into believing that Facebook’s data collection and privacy practices were more protective than they actually were.

    In Plaintiffs’ view, these false assurances prevented other firms from effectively competing in the alleged PSNS market. The user Plaintiffs contended that this barrier to competition injured them in a manner contemplated by the antitrust laws.

    For the request to certify a class comprised of millions of Americans who used Facebook over the span of four years, the user Plaintiffs advance a single theory of antitrust injury. The theory is that, but for the misrepresentations about data privacy, Meta would have found itself in a competitive PSNS market that would have forced it to pay users for their data to retain robust user engagement. This theory is based entirely on the report of Economides, who opined that “Facebook would have compensated [users] a certain amount per month for their data in the but-for world where [users] knew the truth about Facebook’s data practices, because the alternative would have led to an unacceptable loss of market share for Facebook.”

    Economics Expert Witness

    Nicholas Economides is an internationally recognized academic authority on network economics, electronic commerce and public policy. His fields of specialization and research include the economics of networks, especially of telecommunications, computers, and information, the economics of technical compatibility and standardization, industrial organization, the structure and organization of financial markets and payment systems, antitrust, application of public policy to network industries, strategic analysis of markets and law and economics.

    Professor Economides has published more than 100 articles in top academic journals in the areas of networks, telecommunications, oligopoly, antitrust, product positioning and on the liquidity and the organization of financial markets and exchanges. He holds a Ph.D. and M.A. in Economics from the University of California at Berkeley, as well as a B.Sc. (First Class Honors) in Mathematical Economics from the London School of Economics. Previously, he taught at Columbia University (1981-1988) and at Stanford University (1988-1990).

    Get the full story on challenges to Nicholas Economides’ expert opinions and testimony with an in-depth Challenge Study. 

    Discussion by the Court

    Economides starts with the general observation that, in competitive markets, “sellers must lower their prices or else lose market share.” He starts with the general observation that, in competitive markets, “sellers must lower their prices or else lose market share.”

    This observation requires immediate modification for the alleged PSNS market because, as every online denizen knows, Facebook and other social-networking apps are provided without charge to users. Economides attempts to account for this fact by saying that, although users do not pay Meta to use Facebook, Meta “charges a price to users in the form of data collection and use.” He then proposes that, in a but-for world where competition in the PSNS market was not illegally constrained as alleged by plaintiffs, rival apps would offer “more competitive privacy practices” than Facebook, which would compel Meta to compete through “a reduction in the effective price of using Facebook.” 

    Economides postulated that this “reduction in the effective price” would take the form of a “negative price,” by which he means an affirmative payment by Facebook to users for their data. He quantified this but-for payment to be $5.00 per user per month.

    Consequently, Economides concluded that the putative class of users suffered antitrust injury by being “overcharged” by Facebook, in that they were not affirmatively paid a flat rate of $5.00 per month for using Facebook, and that this resulted over the relevant class period in “total damages to the Class of $52.8 billion (pre-trebling).”

    Meta’s Motion To Exclude Economides’ Testimony

    Meta stated that Economides’ antitrust injury opinions amount to ‘junk science’ and should be excluded from the case under Federal Rule of Evidence 702 and the familiar standards set by the Daubert line of cases. 

     In Meta’s view, “the mere theory of ‘negative price markets’ . . . cannot bridge the analytical gap between how [Facebook] actually competes for users and how Economides speculates it would.” 

    Economides’ Antitrust Injury Opinions

    Meta did not challenge Economides’ qualifications, and rightfully so. The record indicated that he is a qualified antitrust economist. 

    Meta’s main criticism was that Economides’ antitrust injury opinion, namely that Facebook users suffered the loss of direct payments for their data that they assertedly would have received in the but-for world, was unsupported by the record.

    The necessary links in Economides’ theory of antitrust injury are: (1) Meta competes on price and quality (2) in the but-for world without the alleged data-privacy deception, Meta would face greater competition from rivals with respect to privacy practices (3) in response to greater competitive pressure, Meta would compete on price instead of quality to avoid losing users to rivals (4) even though the price for using Facebook is “zero,” in the sense that no money is exchanged, economic theory recognizes that competitive conditions in certain markets can result in “negative” prices (5) accordingly, Meta would pay users a “negative” price to retain them instead of collecting less data.

    Because Economides cited credible sources for the various economic concepts he applied, the Court saw no basis for concluding those theories and principles themselves are not well accepted in the field of economics.

    In response to greater competitive pressure, Meta would compete on price instead of quality to avoid losing users to rivals

    Meta did not challenge Economides’ belief that Facebook would not change its data-collection practices in the but-for world. Rather, the thrust of Meta’s challenge to his opinions on antitrust injury concerns the third link described above that Facebook would choose to compete on price instead of quality in the but-for world to avoid losing users.

    To be sure, Economides relied on economic literature discussing the theory and existence of negative prices in online and double-sided platform markets, which are the types of markets the PSNS market is said to be. However, the Court held that economic theory alone does not make his opinions admissible. 

    In addition, the user Plaintiffs did not even allege, let alone establish with evidence, that any other participant in the PSNS market has ever competed by paying users. In telling contrast, Meta provided evidence that firms in the PSNS and adjacent markets have never competed via “negative” prices.

    The record undercuts the third link in Economides’ theory by demonstrating that firms in the PSNS market, including Meta, have consistently competed on the axis of quality through better content, functionality, services, and the like to keep users engaged and the stream of user data flowing, even if the firms theoretically could compete on price. The Court held that this undisputed record about the real world, and the lack of any meaningful contrary evidence, is a big red flag for Economides’ theory.

    Also, citations to economic literature did not demonstrate that the economic principles of zero-and negative-price markets were reliably applied to the facts of this case.

    Overall, Economides did not identify reliable and validated economic literature to support his specific conclusion that, upon coming to the proverbial fork in the road between quality and price, Facebook would choose price in the but-for world

    Lack of Sufficient Factual Grounds

    Besides, Economides pointed to research initiatives where Meta paid individuals in test groups to permit Meta to harvest and use a range of data from them. The problem for Economides is that these market-research programs entailed payments for user data outside the context of Facebook’s social-networking services, where Meta is not already “bartering” for user data with Facebook’s services and the quality thereof. 

    The problem of factual fit also affected Economides’ opinions about Meta’s internal discussions of paying users. The Court held that the two discussions that he highlighted actually concerned user data that Meta could not or did not already obtain through Facebook’s social-networking service.

    A third proposal discussed by Economides arose in the context of Apple’s 2020 App Tracking Transparency (ATT) feature, which required apps running on Apple products to “obtain users’ agreement to ‘track’ users (i.e., collect and use their data) outside that app” through a pop-up prompt. This proposal contemplated paying a “data dividend” (i.e., money for relevant purposes) “to users to incentivize them to continue providing their data to Facebook” when confronted with the ATT prompt. The Court found Economides’ analysis of this proposal and its relevancy perfunctory to the point of being of little utility.

    To be sure, a fourth and final proposal did contemplate “paying users for access to their personal information” as part of a “transparent approach to privacy that should become the model moving forward.” 

    The Court held that this idea alone, which Meta ultimately rejected, is too thin a reed on which to base the sweeping extrapolation Economides makes that Meta would pay all U.S. users money every month for using Facebook.

    Analysis

    Even taken as a whole, the Court held that the four proposals did not provide “sufficient factual grounds”  for the third necessary link in Economides’ theory. 

    For all four, he opined that “Facebook recognized that the data it was collecting and using was responsible for much of its revenue and that it would make economic sense to compensate users in order to get that data (rather than lose it).”

    But that conclusion does not necessarily follow from the starting point. Economides never explained why Meta would focus exclusively on answering new competition by paying users. There is no doubt, as he says, that Meta makes a lot of money from user data, but he did not demonstrate that Meta would be compelled to retain users by paying them, rather than through innovations in services and product quality. This shortfall goes beyond merely ignoring evidence that Meta in the real world has consistently competed on the basis of quality.

    Consequently, the Court concluded that Economides’ opinions cannot be the basis for finding antitrust injury in this case. 

    Held

    The Court granted in part Meta’s motion to exclude Economides’ opinions about antitrust injury. The Court denied the user Plaintiffs’ renewed motion for class certification.

    Key Takeaway:

    There is simply too great an analytical gap between the facts on which Economides relies and that third link in his theory. The purpose of the Court’s inquiry under Rule 702 is to “ensure that proposed expert testimony imparts ‘scientific knowledge’ rather than guesswork.” Because that necessary third step in his theory of antitrust is without basis, and so rests on guesswork, the Court cannot conclude that Economides’ methodology and opinions are reliable and consequently admissible.

    An expert’s job is to consider existing data and make inferences, hypotheses, and extrapolations, and “for this reason, ‘an expert is permitted wide latitude to offer opinions.’” Even so, there must be a sound foundation in the evidence to support every step on the way to their conclusions. 

    Case Details:

    Case Caption: Klein Et Al V. Meta Platforms
    Docket Number: 3:20cv8570
    Court: United States District Court for the Northern District of California
    Order Date: January 24, 2025
  • Economics Expert Witness’ Testimony Admitted Despite His Use of Spot Export Prices

    Economics Expert Witness’ Testimony Admitted Despite His Use of Spot Export Prices

    Plaintiffs The Tripp Plating Works, Inc. (“Tripp”) and Finch Paper, LLC (“Finch”) (collectively referred to as “Indirect Purchaser Plaintiffs” or “IPPs”) alleged that Defendants Olin Corporation (“Olin”), K.A. Steel Chemicals, Inc. (“K.A. Steel”), Occidental Chemical Corporation (“OxyChem”), Westlake Chemical Corporation (“Westlake”), Shintech Incorporated (“Shintech”), and Formosa Plastics Corporation, U.S.A. (“Formosa USA”) (collectively, “Defendants”) conspired to artificially reduce or eliminate competition for the pricing of caustic soda sold in the United States. IPPs claimed that Defendants colluded to fix caustic soda prices, forcing purchasers to pay inflated, supracompetitive prices.

    In response, Shintech and Formosa USA separately moved to strike portions of the testimony provided by IPPs’ expert witness, Dr. Gareth Macartney, Ph.D. Additionally, all Defendants jointly moved to exclude certain opinions offered by Macartney. IPPs, in turn, have also moved to strike and exclude certain opinions offered by the Defendants’ expert witness, John H. Johnson IV, Ph.D.

    Economics Expert Witnesses

    John H. Johnson IV, Ph.D, is the Chief Executive Officer of Edgeworth Economics, LLC, a consulting firm that provides clients with objective expert economic and financial analysis for complex litigation and public policy debates. He holds a B.A. in Economics from the University of Rochester and a Ph.D. in Economics from the Massachusetts Institute of Technology (MIT), where he specialized in labor economics and econometrics. Johnson leverages his expertise to deliver analytical clarity and strategic insights to clients facing high-stakes legal and policy challenges.

    Get the full story on challenges to John H Johnson IV’s expert opinions and testimony with an in-depth Challenge Study.   

    Gareth Macartney is the Senior Economist, Director of Competition, and Chief Executive Officer at OnPoint Analytics, Inc., an economic and statistical consulting firm. He holds a Ph.D. in Economics from University College London. Macartney specializes in providing rigorous economic and statistical analysis, particularly in matters related to competition and complex litigation.

    Want to know more about the challenges Gareth Macartney has faced? Get the full details with our Challenge Study report.   

    Discussion by the Court

    a. Class Certification

    On December 28, 2023, the Court denied a motion for class certification filed by the Direct Purchaser Plaintiffs (DPPs), including Miami Products & Chemical Co., Amrex Chemical Co., Inc., Main Pool and Chemical Co., Inc., Midwest Renewable Energy, LLC, Perry’s Ice Cream Company, Inc., and VanDeMark Chemical, Inc. The Court now addresses a similar request by the Indirect Purchaser Plaintiffs (IPPs) to certify two classes under Federal Rule of Civil Procedure 23. The Court assumes familiarity with the DPP Class Certification Decision and Order and prior proceedings in this matter.

    IPPs adopted the factual background from the DPPs’ motion for class certification. The Court incorporated by reference the detailed summary of Defendants’ alleged manipulation of the caustic soda market, which purportedly caused customers to pay supracompetitive prices. The allegations focused on Defendants’ price increase announcements and their impact on the caustic soda market.

    The IPPs argued that common issues predominated, justifying class certification. However, the Court found that IPPs failed to meet the requirements of Rule 23(b)(3). Their damages model, prepared by Macartney, relied on flawed data from Dr. Russell Lamb, who misclassified contract types by not reviewing individual contracts. This error undermined the model’s ability to demonstrate class-wide injury. Additionally, Macartney’s assumption that price increase announcements influenced index-based pricing was speculative and lacked evidentiary support. He failed to show how inflated prices were incorporated into price indices, a critical component for proving class-wide injury.

    The pass-through model, based on data from only three distributors out of more than 155, was not representative of the proposed class. This limited dataset did not capture the complexities of the supply chain, leading to individualized issues that overshadowed common questions. Therefore, the Court concluded that IPPs did not provide a reliable method for proving class-wide injury and damages, and denied class certification.

    b. John H Johnson IV

    Johnson has provided an expert report responding to and critiquing Macartney’s opinions. Johnson argues, among other things, that: (1) Macartney’s assessment of the impact of Defendants’ price increase announcements is disconnected from economic evidence, in part because pricing for caustic soda is individually negotiated between each supplier and distributor, and the pricing mechanisms and terms vary substantially across distributors, Defendants, and over time; (2) the overcharge regression fails to account for global supply and demand conditions that impact the domestic price of caustic soda; (3) the overcharge regression improperly calculates an average overcharge for distributor and non-distributor purchasers, rather than customer-specific overcharges; (4) the pass-through model relies on data from only three distributors to estimate pass-through rates for 155 distributors, with no statistical tests to support the conclusion that the purchases and sales associated with these three distributors are representative of those excluded from the analysis; and (5) the pass-through model oversimplifies the caustic soda supply chain.

    As part of his critique of the regression model, Johnson conducted his own multiple regression analysis, adding various export price measures. He ran six additional regressions, each incorporating one measure of export prices (contemporaneous and three-month lagged). These additional tests yielded an estimate of the purported overcharge that was negative or statistically insignificant.

    Admissibility of Johnson’s Opinions

    IPPs argue that Johnson’s overcharge regression analyses, and his opinions and testimony based on them, are unreliable because they are prone to endogeneity and fail to reliably control for global supply and demand for caustic soda. More specifically, IPPs contend that Johnson committed a fundamental error by using spot export prices as a variable, asserting that such prices are not reliable indicators of international prices or demand in their respective localities. IPPs acknowledge that DPPs raised a similar argument regarding Johnson’s opinions during their class certification motion and similarly seek exclusion of his spot export price analyses.

    Previously, the Court considered and rejected the argument that Johnson’s use of spot export prices rendered his analysis and testimony unreliable. The Court found Johnson’s explanation of his methodology reasonable and persuasive. Nothing in the IPPs’ submissions provides a basis for the Court to reconsider its prior finding that there is no justification under Rule 702 to strike or exclude Johnson’s opinions. Accordingly, the Court denies IPPs’ motion to strike Johnson’s opinions and testimony.

    c. Gareth Macartney

    Macartney has opined, among other things, that: (1) common evidence demonstrates that the structure of the caustic soda industry is conducive to anticompetitive behavior; (2) common evidence and methods demonstrate that Defendants engaged in collusive behavior that artificially increased the price of caustic soda; and (3) a common, reliable standard economic methodology may be used to calculate damages on a classwide basis. Applying that methodology, he has estimated class-wide damages of $155 million for the State Antitrust Class.

    Macartney has further opined that class-wide damages for the Unjust Enrichment Class can also be calculated using common evidence, amounting to $712 million in revenue terms, $355 million in gross profit terms, and $348 million in net profit terms.

    A key part of his opinion is the performance of a reduced-form pricing regression analysis to demonstrate that caustic soda prices were artificially inflated during the alleged class period. To conduct this analysis, Macartney used a standardized database of Defendants’ transaction data received from Russell Lamb, DPPs’ expert economist. His model shows an overcharge of 11.61% for all of Defendants’ customers and a 16.37% overcharge for distributor customers. He then applied a regression model to estimate the proportion of Defendants’ price increases passed through to distributor customers. This model provides an estimate of passthrough at a rate of 81%.

    The Court denies the Defendants’ motions to strike Macartney’s opinions and testimony as moot.

    Held

    The Court denied Shintech’s and Formosa’s motions to exclude certain opinions and proposed testimony of Gareth Macartney as moot and denied Defendants’ joint motion to exclude his opinions and testimony. The Court also denied IPPs’ motion to strike and exclude portions of John H. Johnson IV’s opinions and proposed testimony.

    Key Takeaways:

    When the opponent contended that Johnson’s use of spot export prices constitutes a true error that requires his analyses to be excluded because the spot export prices are not indicators of international prices or demand in their respective localities, the Court held that Johnson has explained his methodology in a way that was both reasonable and persuasive.

    Case Details:

    Case Caption: Miami Products & Chemical Co. V. Olin Corporation Et Al
    Docket Number:  1:19cv385 ; 1:19cv975
    Court: United States District Court for the Western District of New York
    Order Date: December 16, 2024