In a recent guest post, Richard Wolfram discussed his objections to recent First and Third Circuit decisions on summary judgment in antitrust collusion cases.  See Supreme Court Dodges Question of Antitrust Summary Judgment Standard, Higher Bar to Reach Jury Splitting Circuits, Will Valspar Be Up Next?  Mr. Wolfram wrote:

As Evergreen [First Circuit case] explained in its petition, and as applies equally in Valspar [Third Circuit case], to require that the plaintiff show by a preponderance of evidence on summary judgment that a jury would find in its favor effectively pre-empts the role of the jury, infringes on the Seventh Amendment right of the plaintiff, and is illogical, in effect raising the bar by requiring that the plaintiff satisfy the preponderance standard at both the summary judgment phase and at trial.  Inquiring minds may wonder — will Valspar be the vehicle where the Court finally addresses these issues?

The plaintiff in Valspar just filed a Petition for Panel Rehearing and Rehearing En Banc in the Third Circuit.  Echoing the comments made by Mr. Wolfram, appellant’s petition states:

En banc review is necessary because the panel’s decision eviscerates the protections of Section 1 of the Sherman Antitrust Act by making an unprecedented summary judgment standard for plaintiffs trying to prove a price-fixing conspiracy by circumstantial evidence in the Third Circuit. A majority of the panel incorrectly created a new “more likely than not” standard to evaluate circumstantial evidence at summary judgment.

Valspar’s petition is here: Valspar en banc petition.

Stay tuned.  Thanks for reading

Below is a post by valued guest contributor, Ai Deng, PhD. of Bates White Economic Consulting.

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In a new article I published in Law360 last week, I discussed the following four reasons why the scope of colluding algorithms, even if they are technologically possible, could be limited:

• Algorithmic asymmetry
• Robust compliance
• Observable collusive outcomes
• Risk of class actions

The paper is titled “Four Reasons We May Not See Colluding Robots Anytime Soon” and is available here. If you do not have a subscription to Law360 but would like to have a copy, please feel free to email me at [email protected]

As always, I appreciate your thoughts and comments. You can reach me at the email above or connect with me on LinkedIn [here].

Thanks for reading.

Below is a Guest Post by Richard Wolfram, counsel for Evergreen Partnering Group, Inc.  Evergreen filed suit alleging polystyrene converters and their trade association engaged in a concerted refusal to deal with the company in violation of the Sherman Act. The United States District Court for the District of Massachusetts initially dismissed the action.  Evergreen appealed and the First Circuit vacated and remanded. 720 F. 3d 33 (1^st Cir. 2013).  The district court then entered summary judgment in favor of the defendants. 116 F. Supp. 3d 1.  (D. Mass. 2015). Evergreen again appealed and the First Circuit upheld the dismissal of the action.  Evergreen Partnering Group v. Pactiv Corp, et. al., 832 F. 3d 1 (1^st Cir. 2017).  After the First Circuit denied without comment Evergreen’s petition for rehearing, Evergreen filed a petition for certiorari with the U.S. Supreme Court.  Respondents filed an Opposition brief at the request of the Court and Evergreen filed a Reply.  (No. 16-1148.)

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On October 2, 2017, the U.S. Supreme Court denied Evergreen’s petition for certiorari in its concerted refusal to deal case from the First Circuit.  Evergreen contended that the court of appeals, in dismissing the case, misinterpreted and misapplied the summary judgment standard in antitrust, and that the standard itself is the source of significant confusion and inconsistent reasoning among the federal circuits and thus calls for clarification by the Court.  Evergreen’s petition was supported by an amicus brief submitted by 12 professors of antitrust law and economics.

The Court, as is customary, gave no explanation for denying Evergreen’s petition.  The Court lost an important and timely opportunity to clarify an issue that has created tremendous confusion and inconsistency among the circuits — the proper tools for applying the summary judgment standard in antitrust.  Although the Court understandably focuses on issues of law and not fact for petitions that it accepts, one has to wonder what set of facts — with the lower court here improperly weighing evidence and making credibility determinations and applying the much-criticized equal inferences rule — would serve as a better vehicle for resolving this question.  This issue is not going away, and anyone who practices antitrust knows that. Click here and here for articles about the decision.

Confirming this comment, and on the same day, a panel of the Third Circuit Court of Appeals publicly issued a decision affirming summary judgment dismissal of a Sherman Act Section 1 oligopoly conspiracy case despite findings of 31 uniform price increases by defendants over 11 years, well over any increase in costs and despite declining demand and excess capacity.  Valspar Corp. v. Dupont,  (3d Cir., 10/2/17). Arguably pre-empting the role of the trier of fact, just as Evergreen alleged the First Circuit did in its case, the Third Circuit panel required that the plaintiff provide inferences that the alleged conspiracy was “more likely than not” rather than applying the general summary judgment standard, as repeated by the Supreme Court in Kodak, that the plaintiff show simply that a jury could reasonably find in favor of the plaintiff.  The plaintiff’s burden at trial is to prove its case by a preponderance of evidence (51%), whereas its burden on summary judgment is simply to show that a jury could reasonably find in its favor — which the Supreme Court itself has explained is less than the preponderance standard. As Evergreen explained in its petition, and as applies equally in Valspar, to require that the plaintiff show by a preponderance of evidence on summary judgment that a jury would find in its favor effectively pre-empts the role of the jury, infringes on the Seventh Amendment right of the plaintiff, and is illogical, in effect raising the bar by requiring that the plaintiff satisfy the preponderance standard at both the summary judgment phase and at trial.  Inquiring minds may wonder — will Valspar be the vehicle where the Court finally addresses these issues?  For more information on Valspar, see write-up by the American Antitrust Institute, which filed an amicus in support of the plaintiff (here).

Richard Wolfram  [email protected]

 

Yesterday I had the pleasure of having lunch with my old boss, John Hughes.  Also with us were former office mates in the Philadelphia Field Office, Brad Geyer, Rich Rosenberg, and Wendy Norman.  I thought I’d post the picture because John is one of the most respected and beloved figures in the antitrust world and people often ask me, “How is John doing?”  John  is doing great!

John began his career in the Department of Justice, Antitrust Division, Philadelphia Field Office and immediately began to work on what would become the Great Electrical Conspiracy cases–a watershed event in antitrust history.  He later became Chief of the Philadelphia Field Office where I worked for 34 years.  Everyone that worked for John agreed–he was the greatest boss, mentor and friend that anyone could ever ask for.  When John retired in 1994, he became a trial advisor on a number of Antitrust Division cases so he got to know and help staffs throughout the Division.   It is pretty common for a trial staff not to want someone looking over their shoulder as an “advisor,” but everyone asked for John.  He is equally respected by the defense and plaintiff bar and the judiciary.

So, I just want to let everyone know John and his wife Helen are doing great.  They keep busy with a very large family of children, grandchildren and great grandchildren.  John gives his best to everyone who helped make his career in antitrust so fondly memorable.

By: Ai Deng, PhD,  Principal, Bates White Economic Consulting

Hope everyone had a wonderful Labor Day weekend. During my time off CartelCapers, I have been working on several research projects. In this post, I’d like to give the interested readers an update on two of them.

When Machines Learn to Collude: Lessons from a Recent Research Study on Artificial Intelligence

From Professors Maurice Stucke and Ariel Ezrachi’s Virtual Competition published a year ago, to speeches by the Federal Trade Commission Commissioner Terrell McSweeny and Acting Chair Maureen K. Ohlhausen, to an entire issue of a recent CPI Antitrust Chronicles, and a conference hosted by Organisation for Economic Co-operation and Development (OECD) in June this year, there has been an active and ongoing discussion in the antitrust community about computer algorithms. In a short commentary (downloadable here), I briefly summarize the current views and concerns in the antitrust and artificial intelligence (AAI) literature pertaining to algorithmic collusion and then discuss the insights and lessons we could learn from a recent AI research study. As I argue in this article, not all assumptions in the current antitrust scholarship on this topic have empirical support at this point.

Sub-regressions, F test, and Class Certification

Did the anticompetitive conduct impact all or nearly all class members? This question is central to a court’s class certification decision. And to answer the question, a methodology—known as sub-regressions (also labelled less informatively as simply the “F test” in the recent Drywall litigation)—is being increasingly employed, particularly by defendants’ expert witnesses. A key step of a sub-regression type analysis is to partition the data into various sub-groups and then to examine data poolability.[1]

Forthcoming in the Journal of Competition Law & Economics, my article titled “To Pool or Not to Pool: A Closer Look at the Use of Sub-Regressions in Antitrust Class Certification” focuses on three areas of interest pertaining to sub-regressions:

• The related law and economics literature related to this methodology
• Courts’ recent class certification decisions in cases where parties introduced sub-regression analysis
• Several methodological challenges, many of which have not been previously acknowledged, as well as potential ways to address them. Specifically, what test should one use? How does one choose the subsets or partitions of data to test? Are individual estimates of damages always the most reliable approach when we believe the impact varies across customers or across some other dimensions?

This paper is currently being processed at the Journal. If you would like a copy, please feel free to reach out to me.

As always, I appreciate your thoughts and comments. You can reach me at [email protected] or connect with me on LinkedIn [here].

Thanks for reading.

Ai Deng, PhD
Principal, Bates White Economic Consulting
Lecturer, Advanced Academic Program, Johns Hopkins University
direct: 2022161802 | fax: 2024087838
1300 Eye Street NW, Suite 600, Washington, DC 20005
[email protected]
BATESWHITE.COM

[1] I first provided an update on this project on CartelCapers here.

Kemp & Associates, Inc. and its vice-president and part owner Daniel J. Mannix, were indicted on August 17, 2016 in the District of Utah on a single-count conspiracy to violate the Sherman Act, 15 U.S.C. § 1, by engaging in a customer allocation agreement.  The agreement at issue was a set of guidelines which governed the joint activity between defendants and co-conspirators.  On March 31, 2017, the defendants filed a Motion for Order that the case be Subject to the Rule of Reason and to Dismiss the Indictment as time barred on Statute of Limitations grounds.  On August 29, 2017, the district court affirmed an earlier ruling that the indictment would be tried under the Rule of Reason, but then made that ruling moot by dismissing the case on statute of limitations grounds.  The court ruled that the conspiracy ended three years outside the statute of limitations.  In a nutshell, the court found the conspiracy ended when the last customer was allocated, while the government argued, unsuccessfully, that the conspiracy continued while the defendants reaped the supra competitive profits from allocating the customers.  The government’s “payment theory” usually prevails, but not in this case.

When I have time, I’d like to comment on the court’s ruling but for now I simply provide the ruling (US v. Kemp & Associates, Inc and Daniel J. Mannix) for your perusal.

Thanks for reading.

P.S.  Want to write a guest post?  The pay stinks but contributors welcome.

The Department of Justice announced yesterday that a second e-commerce company and its top executive agreed to plead guilty to price-fixing for customized promotional products including wristbands.  The press release stated:

The investigation has revealed that the conspirators used text messaging and other online messaging platforms to reach and implement their illegal agreements.  Specifically, the defendants and their co-conspirators agreed, from as early as June 2014 until June 2016, to fix the prices of customized promotional products sold online, including wristbands.  In addition to agreeing to plead guilty, Custom Wristbands has agreed to pay a $409,342 criminal fine.

The full press release can be read here.

The developments were also covered in an industry publication, the Advertising Specialty Institute,  here.   The article noted that in early August, Zaappaaz Inc., which has done business as both a supplier and distributor under names including WB Promotions Inc., along with its president Azim Makanojiya, opted to plead guilty to conspiring to fix prices for customized promotional products sold online.  The investigation is continuing.

It is worth noting that prosecutors have been able to uncover and prosecute this scheme by recovering evidence such as text messages and other messaging platforms.  The Antitrust Division has the tools and know how to recover electronic footprints from virtually any form of electronic media.  And good old fashion face-to face meetings, as there were also apparently in this case, can also leave a trail of evidence.

Thanks for reading.

 

Bloomberg has reported that Senator Elizabeth Warren has put a hold on the Senate confirmation vote of Makin Delrahim to head the Antitrust Division, U.S. Dept. of Justice. (here).  The Senate Judiciary Committee approved Delrahim’s nomination 19-1 on June 8.  As explained in the Bloomberg article, this move, if true, blocks the confirmation vote by the full Senate until at least September.

This is unfortunate news and counterproductive to Senator Warren’s stated goal of robust antitrust enforcement.  Of course, Mr. Delrahim may not be Senators Warren’s choice to lead the Antitrust Division, but that is not the criteria for his confirmation.  Mr. Delrahim is experienced and cares deeply about antitrust enforcement.  He is  well-respected in the antitrust community and has strong bi-partisan support.  It is a serious handicap to effective antitrust enforcement to continue to keep the top position in the Antitrust Division vacant.  The men and women of the Antitrust Division, the  business community and the American consumers deserve a fully functioning enforcement agency–especially one that is responsible for both civil and criminal investigations.  This delay hurts all competition law stakeholders (here).