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OnPoint Expert Assists Class Certification Victory in In Re: Egg Products Antitrust Litigation

The District Court of Eastern Pennsylvania recently certified the shell egg sub-class in a case brought on behalf of direct purchasers who alleged that the nation’s major egg producers conspired to artificially increase the price of shell eggs in the United States. In the September 18th memorandum in In Re: Processed Egg Products Antitrust Litigation, Judge Gene Pratter concludes that “common issues predominate with respect to the antitrust injury to the shell egg subclass.” Judge Pratter’s class certification decision relied extensively on the testimony and analyses of OnPoint expert Dr. Gordon Rausser, who examined the economics of U.S. egg production and pricing and testified on behalf of the Direct Purchaser Class. Judge Pratter found that Dr. Rausser’s analysis of the shell egg industry “highly probative of the extent to which the alleged conspiracy, if shown to be successful, would have affected virtually every member of the proposed shell eggs subclass.” Judge Pratter also found:

  • “Plaintiffs have shown that common evidence is capable of demonstrating that Defendants engaged in a series of complementary supply-reducing actions as part of a conspiracy to increase the price of eggs. Dr. Rausser has measured whether that conspiracy was successful in increasing the price of eggs. His model fits the theory of liability and satisfies ” (p. 38)
  • “Plaintiffs have shown that Dr. Rausser’s model is reliable enough in attributing the damages found in Dr. Rausser’s model to the conspiracy.” (p. 38)
  • “Defendants’ attempts to decouple the observed price increases from the alleged output restriction do not convince the Court that Dr. Rausser’ s model is incapable of demonstrating antitrust impact using classwide evidence.” (p. 39)
  • “Defendants have not identified any variables materially affecting the price of eggs that were not included in Dr. Rausser’s models.” (p. 44)
  • “Defendants argue that Dr. Rausser’s regression is flawed because the benchmark period (i.e. the “normal” years against which he compares the conspiracy years to see if the price of eggs was inflated-here, 1997-2000 is the benchmark) is allegedly also tainted by some anticompetitive conduct. As Plaintiffs point out, however, if anything, any anticompetitive activity during the benchmark period would make Dr. Rausser’s results conservative.” (p. 41)

The Judge declined to certify the much smaller subclass of egg products, which includes frozen, dried or liquid egg products.

To read the memorandum, click here.

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OnPoint Named One of The Recorder‘s “Best of 2015” for IP Litigation Consulting

OnPoint Analytics has been recognized as one of the best firms for “Intellectual Property Litigation Consulting Services” in The Recorder’s recent “Best of 2015” issue. The Recorder’s annual list ranks the top legal services providers according to a reader survey of nearly 3,000 legal professionals working throughout California. To learn more about OnPoint’s expertise and experience in intellectual property cases, click here; to learn about OnPoint’s focus on intellectual property in the pharmaceutical industry, click here.

The Recorder is one of the leading providers of breaking legal news and trends, courthouse and statehouse developments, law firm news, and profiles of the people of interest to California legal professionals.

Click here to read The Recorder‘s “Best of 2015” issue.
To read about OnPoint’s role in the recent IP case Fujifilm v. Motorola, click here.

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OnPoint Expert Testifies at Trial in Fujifilm v. Motorola

OnPoint Expert Dr. Gareth Macartney testified as Fujifilm’s damages expert in Fujifilm v. Motorola at a jury trial held last month in the U.S. District Court for the Northern District of California. The case involved allegations that Motorola incorporated technologies patented by Fujifilm into its mobile phones and tablets. Following a two-week trial, during which Dr. Macartney provided both direct and rebuttal testimony, the seven-person jury awarded Fujifilm $10.2 million in damages after determining that Motorola infringed upon U.S. Patent 6,144,763—a method of converting digital color photos to monochrome. The jury’s verdict on damages aligned with the estimates provided by Dr. Macartney, rather than those provided by Motorola’s damages expert. While the jury found that the three other patents at issue in the case (pertaining to face-detection and wireless data transfer) were invalid, the $10.2 million award for the ‘763 patent alone exceeded the damages estimated by Motorola’s damages expert for all four patents combined.

To learn more about the verdict in Fujifilm Corp. v. Motorola Mobility Holdings Inc. et al., click here.

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OnPoint Experts Win Antitrust Writing Award

“Antitrust Class Proceedings – Then and Now,” an article co-written by OnPoint experts Gordon C. Rausser and Gareth J. Macartney, received a 2015 Antitrust Writing Award for Best Academic Article in the Private Enforcement category. The article, which was published last year in Vol. 26 of Research in Law and Economics, addresses the 2013 ruling in Comcast Corp. v. Behrend, 133 S. Ct. 1435, and its significance regarding the evolution of standards for reliable economic analysis in class certification.

The Antitrust Writing Awards are hosted by Concurrences Journal and George Washington University’s Competition Law Center. The Awards are intended to promote antitrust scholarship and competition advocacy by recognizing the best antitrust writing in the fields of law and economics. The winning articles—which were selected by a jury of academics, attorneys, and Concurrences readers—were announced at an April 14th gala dinner in Washington D.C.

To read the full text of the winning article, “Antitrust Class Proceedings – Then and Now,” click here.

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OnPoint Expert Featured in The Chronicle of Higher Education

Dr. John Connor, OnPoint expert and Emeritus Economics Professor at Purdue University, is featured in an article in The Chronicle of Higher Education, which profiles Dr. Connor’s research and career as an expert on international price-fixing conspiracies. Dr. Connor is dubbed the “King of Cartels,” a status recognized by a lifetime-achievement award from the American Antitrust Institute, a bipartisan center where he serves as a senior fellow.

“Mr. Connor’s work, including his book Global Price Fixing, is influential. His private database, where he has recorded nearly 900 international price-fixing scandals, has no known parallel. He has become a courtroom fixture, consulting for cases against putative cartels.”

To read the article, “An Economist Corners the Market on Global Cartels,” click here.

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OnPoint Expert Published in The Review of Economics and Statistics

OnPoint expert Dr. Gareth Macartney was recently published in The Review of Economics and Statistics. The article, which was co-authored with Dr. Rachel Griffith at the Institute for Fiscal Studies and University of Manchester, is entitled “Employment Protection Legislation, Multinational Firms, and Innovation.”

Abstract:
The theoretical effects of labor regulations, such as employment protection legislation (EPL), on innovation is ambiguous. EPL increases job security, and the greater enforceability of job contracts may increase worker investment in innovative activity. But EPL increases firms’ adjustment costs, which may lead to underinvestment in activities that are likely to require adjustment, including technologically advanced innovation. In this paper, we find empirical evidence that these effects are at work—in particular, a higher share of multinational enterprise innovative activity in countries with high EPL is technologically advanced.

To read the full article, click here.

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$76 Million Awarded to AstraZeneca from Apotex for Prilosec Generic

A U.S. federal judge awarded AstraZeneca Plc $76 million in damages from generic drug manufacturer Apotex for infringing on patents for the heartburn drug, Prilosec® during 2003 to 2007.

After a two-week bench trial, Judge Denise Cote in New York concluded that Astra is entitled 50% of the profits gleaned by Apotex, Canada’s largest generic pharmaceutical company, from its infringing sales during the three-and-a-half years it sold a generic version of Prilosec.

Dr. Gordon Rausser, Chairman and Co-founder of OnPoint Analytics and Robert Gordon Sproul Distinguished Professor at the University of California, served as one of five expert witnesses for AstraZeneca. Dr. Rausser’s study of pharmacy log data and his supporting testimony played a significant role in litigation involving AstraZeneca’s efforts to protect their top-selling drugs over the course of the last decade.

A calculation of damages was the remaining issue in this trial because in 2007 Barbara S. Jones, a federal judge in New York, determined that the Apotex generic infringed AstraZeneca’s patent due to a microscopic, water-soluble salt layer or subcoating formed during the manufacturing process.

This decision finalizes action by AstraZeneca against various generic drug makers in an effort to protect their blockbuster drug Prilosec, before U.S. patent protection ends.

AstraZeneca successfully launched a non-prescription version of Prilosec as its patent expired, and their next-generation heartburn drug, Nexium, has garnered multibillion-dollar sales.

The case is AstraZeneca AB et al. v. Apotex Corp. et al., U.S. District Court for the Southern District of New York, No. 01-9351.

As one of five expert witnesses called to examine evidence and provide supporting testimony in AstraZeneca AB et al. v. Apotex, Dr. Rausser examined pharmacy log data for all prescription PPI purchases from sixteen California pharmacies and fourteen Massachusetts pharmacies obtained when Astra was responding to class action claims that consumers were misled into believing that Nexium® was superior to Prilosec®, and were injured by having to pay an unjustified price premium for Nexium®.

Dr. Rausser’s evaluation of the data provided incontrovertible evidence to support his opinion and expert testimony that a large portion of the proposed class suffered no economic harm because Nexium® was a less expensive therapy.

The study also demonstrated that the effective cost of Nexium® therapy for Third Party Payers (TPPs) to whom Astra offered rebates was often less than omeprazole therapy during the period between December 2002 and November 2003.

Astra’s official rebate policies support Dr. Rausser’s overarching hypothesis that Nexium® rebates were to some degree responsive to the price of generic omeprazole. Following the entry of generic omeprazole, Astra increased its rebates on Nexium®, and included the generic product in calculations of market share for rebates that were determined on that basis.


Dr. Rausser’s analysis could not include rebates generic omeprazole manufacturers may have been giving to mail order pharmacies. Because the data available to him included only the “deepest available rebates”, Dr. Rausser could not determine the effect those rebates might have had on average prices of omeprazole. But the mail order market accounted for only 13% of all U.S. drug sales in 2003, and only 8.5% of Nexium® sales from January to October 2003.

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Favorable Settlement in LCD Price-Fixing Case

Analysis performed by OnPoint expert Dr. Gareth Macartney helped secure a favorable settlement for Eastman Kodak in its dispute with LCD panel manufacturers Epson, AU Optronics and Toshiba. The settlement resolved a dispute centered on allegations that the Defendants participated in an international price-fixing conspiracy involving thin film transistor liquid crystal display (TFT-LCD) panels. The antitrust lawsuit was part of a multidistrict litigation against the world’s leading TFT-LCD manufacturers in Taiwan, Korea and Japan. To date, the consolidated TFT-LCD price-fixing litigation has produced at least $1.39 billion in settlement deals and has led to guilty pleas and criminal charges against companies and individuals connected to the alleged price-fixing scheme.

TFT-LCD panels are used in flat-panel televisions, computer monitors, laptop computers, digital cameras, camera phones and other devices. At the time of the conspiracy, Kodak was among the top three digital camera brands in the US, and it purchased digital cameras manufactured by Original Equipment Manufacturers (OEMs) in Asia. Those cameras contained TFT-LCD panels that the OEMs purchased from panel manufacturers, such as the Defendants. Kodak suffered increased camera costs to the extent that the OEMs passed through TFT-LCD panel prices elevated by the conspiracy.

Dr. Macartney submitted an initial expert report and provided expert testimony on behalf of Plaintiff Kodak, investigating the economic injury suffered by Kodak as a result of Defendants’ price-fixing conspiracy. Dr. Macartney’s analysis demonstrated that the price-fixing conspiracy increased the price of TFT-LCD panels of all sizes to supra-competitive levels, and that the OEMs passed through a substantial portion of the price increase to Kodak in the form of higher prices for digital cameras. Further, Dr. Macartney quantified the damages Kodak suffered due to its inability to pass-through the full extent of the increased costs to its retailer customers.

In response, Defendants filed expert reports by Dr. Dennis W. Carlton, Dr. Edward A. Snyder, Dr. James A. Levinsohn, Dr. Jerry A. Hausman, Dr. George Foster, Dr. Barry C. Harris, Dr. Robert E. Hall and Mr. Bruce F. Deal, among others. Dr. Macartney responded with two expert reply reports and provided a second day of deposition testimony.

The trial was set to begin on July 22, 2013. Kodak reached a settlement with Epson in the spring of 2013, and with AU Optronics a week before trial, on July 18. A third settlement was reached with Toshiba on the eve of trial. Karl D. Belgum of Nixon Peabody LLP, successfully representing Kodak, reported that Kodak was “pleased by the settlement.”

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Leading a Series of Class Certification Victories

This year, four important decisions came down certifying plaintiff classes of 1) rail freight shippers who were subjected to fuel surcharges, 2) indirect purchasers of nasal spray fluticasone propionate (brand name Flonase) who were forced to pay higher prices because of delayed generic entry, 3) Southeastern dairy farmers who received suppressed prices for their raw milk production, and 4) Northeastern dairy farmers who received suppressed prices for their raw milk production.  In all four cases, the plaintiffs’ economic expert was Gordon Rausser and he was supported by the staff of OnPoint Analytics, Inc.

Rail Freight
In a long-awaited decision, on June 21, 2012 Judge Paul Friedman of the United States District Court for the District of Columbia certified a class consisting of all direct purchasers of rail freight services who had been subjected by four defendants to fuel surcharges over the period July 1, 2003 through December 31, 2008. Plaintiffs contend that the four largest rail freight carriers in the United States colluded to administer fuel surcharges on their customers’ freight shipments that far exceeded the amount necessary to recover rising fuel costs.  Instead, the fuel surcharge program allegedly represented a convenient pretext for the railroads collectively to raise their rates without triggering price competition. The Opinion was unsealed on July 13 with redactions requested by defendants to protect confidential information.  Judge Friedman’s 148-page opinion is notable for its thorough treatment of the economic and statistical analyses offered by each side.  The Court carefully distinguished between the common factors regression Dr. Rausser employed to investigate common impact and predominance, and the damage regression he thereafter applied to quantify class-wide losses.  Judge Friedman concluded that “Dr. Rausser’s common factor and damage models together set forth persuasive, workable multivariate regressions that give rise to an inference of causation (the most any regression analysis can be expected to do)….”  The Court explicitly recognized that no regression model can explain 100% of price variation, and found that Dr. Rausser’s two models, with R-Squared statistics ranging from 76% to 89%, “provide high levels of explanatory power.”  The Court also rebuffed speculation by defendants’ economist, Robert Willig, that some shippers may have been able to escape the effects of the conspiracy, instead agreeing with Dr. Rausser’s determination that “there was no evidence of systematic discounting” and that “any examples of such discounting are outliers, insufficient to defeat a finding of predominance.”  The Court also concluded that “the five structural characteristics of the rail freight industry identified by Dr. Rausser, and the evidence that he marshals regarding those characteristics, provide strong support for plaintiffs’ contention that injury in fact is capable of proof at trial with evidence common to the class.” In its breadth and detail the Opinion comprehensively addresses many of the most vexing empirical challenges related to certification under Hydrogen Peroxide, Wal-Mart and their progeny, and offers sound guidance about the professional standards applicable to expert testimony in this area.  To view Judge Friedman’s Opinion, click here.

Flonase
Just three days before the Rail Freight Opinion, on June 18, 2012 the Honorable Anita Brody of the United States District Court for the Eastern District of Pennsylvania certified a 4-state class of indirect purchasers of fluticasone propionate, which is also sold by GlaxoSmithKline under the brand name Flonase. Plaintiffs allege that GSK filed sham citizen petitions with the Food and Drug Administration to delay the introduction of a cheaper, generic version of Flonase, and that consumers and insurers were consequently forced to pay higher prices.  Relying on Dr. Rausser’s analysis, the Court’s opinion clearly describes how incumbent brands rapidly lose market share to generic equivalents and how generic competition drives prices down to the benefit of consumers and third party payers. GSK’s economic experts argued that differences in transaction prices by location, payment method and insurance type meant that many proposed class members would not have been injured.  Rather than merely accepting this argument, Judge Brody carefully considered the proffered evidence and found it unconvincing.   Instead, she concluded that the price data analyzed by Dr. Rausser demonstrated uniformity across states and transaction types, once various characteristics were properly controlled for.  As she explained, “Rausser did much more than simply compare a monthly average FP price in the actual and ‘but-for’ worlds to demonstrate common impact.  He conducted a sensitivity analysis to test whether his methodology was robust in assessing impact for all three types of class members.  He also showed that each named plaintiff TPP [third party payer] was injured during the Class Period, applying the available common data and his yardstick methodology.  I am satisfied that the data variation in this case is not so extreme as to mask the absence of injury for a significant number of class members.”  Consequently, she concluded that Plaintiffs “have demonstrated that they can establish impact to this class … through class-wide evidence.”  The Court approved Dr. Rausser’s benchmark approach to quantifying class-wide damages and found it to be workable given the available data. As Judge Brody reported, “it is clear that the expert opinion of Rausser… [was a] reliable, relevant, and significant contribution to the issues raised by Indirect Purchasers’ class certification…”  To view Judge Brody’s Opinion, click here.

Southeast Milk
The month began with a decision on June 1, 2012 from Judge Ronnie Greer of the United States District Court for the Eastern District of Tennessee certifying a sub-class of Southeastern dairy farmers who are also members of the country’s largest dairy cooperative, Dairy Farmers of America. Plaintiffs allege that dairy processors conspired to drive down the price of their most important input, raw milk, and that some cooperatives participated in the scheme. Dr. Rausser identified the unique supply and demand characteristics of the region and analyzed data for millions of raw milk purchases both in the Southeast and in two benchmark regions. The Court originally certified a class consisting of both DFA and non-DFA dairy farmers. Because of plaintiffs’ claim for injunctive relief in addition to damages, the Court subsequently decertified the DFA sub-class based on defendants’ argument that DFA members may have benefitted from some of the trade practices sought to be enjoined. However, in the June 1, 2012 ruling, the Court recertified the DFA subclass, relying in part on Dr. Rausser’s opinion that “Defendants’ actions to fix and suppress the prices paid to dairy farmers… reduce prices that all members of the class received for their milk below competitive levels.” The case has already produced settlements with Dean Foods, Southern Marketing Agency and one individual defendant totaling $145 million. Trial is set for November 6, 2012. To view Judge Greer’s Order, click here.

Northeast Milk
On November 19, 2012, the U.S. District Court for the District of Vermont granted Plaintiffs’ Renewed Motion for Class Certification. Plaintiffs contend that “the Defendants engaged in a wide-ranging conspiracy at both the processor and cooperative levels to fix, stabilize, and artificially depress prices for raw Grade A milk and to allocate markets within Federal Milk Market Order 1 among the co-conspirators.” Relying heavily on the report prepared by Dr. Rausser and his staff at OnPoint, Judge Reiss found that Plaintiffs have successfully established the existence of all four Rule 23(a) requirements necessary for class certification: numerosity, commonality, typicality, and adequacy. Furthermore, when addressing the issue of “antitrust impact”, a central tenet upon which this renewed motion succeeded, Judge Reiss specifically addresses the strength in Dr. Rausser’s revised multivariate regression model in comparison to the model proposed by the defendant’s expert. In light of the “complex nature of the case” among other factors, the Court found that “a class action is the most fair, efficient, and effective vehicle for the presentation of Plaintiffs’ claims and Defendants’ defenses to them.” To view Judge Reiss’ Order, click here.

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Enthusiastic Reviews for Political Power and Economic Policy

Dr. Gordon C. Rausser recently joined with esteemed colleagues Johan Swinnen and Pinhas Zusman to write Political Power and Economic Policy: Theory, Analysis, and Empirical Applications. This book analyzes the links between political economics, governance structures, and the distribution of political power in economic policy making. The book theoretically explains and empirically quantifies these interactions. The analysis includes both public good policies and redistributive policies. Part 1 of the book presents the conceptual foundations of political-economic bargaining and interest group analysis. After presenting the underlying theory, Part 2 of the book examines ideology, prescription, and political power coefficients; Part 3 analyzes a number of specific structures; and Part 4 presents a framework for political econometrics with a number of empirical applications and testable hypotheses. In all four parts of the book, four analytical dimensions of public policy are distinguished: governance structures, political economy, mechanism design, and incidence.

Selected Editorial Reviews

  • George A. Akerlof, Nobel Laureate in Economics, concluded, “Gordon Rausser et al’s Political Power and Economic Policy tells us what everybody wants to know in this new world where lobbying and political maneuvers have replaced economic sense. What is the relation between economic rationality and political maneuvering? And how do we contain the interest groups that have trumped the public well-being to accomplish their selfish ends?”
  • Justin Yifu Lin, The World Bank, stated, “Rausser, Swinnen, and Zusman have produced an authoritative text that is likely to remain a standard reference for many years to come. They examine how political power, interest groups, and institutions affect the allocation of resources and the distribution of income in static and dynamic frameworks. The volume contains applications to policy issues from R& D to quality standards, land reform, and natural resource management.”
  • John List, University of Chicago, provided, “A fascinating gem that once picked up is difficult to put down. It makes difficult materials in political economy easily accessible, and is quite useful for the practitioner.”

To see more reviews for Political Power and Economic Policy: Theory, Analysis, and Empirical Applicationsclick here.