Expertise Category: Law and Economics

In the last 30 years, the courts have increasingly used economic analysis to formulate antitrust law. More and more, competitive effects outweigh other tests of the impact of challenged behavior. Traditional, populist concerns have faded; concerns with effects on consumers have become preeminent. Now, all but the most routine cases require economic analysis. Government policy has undergone the same shift. The enforcement agencies use economic analysis to gauge the government’s interest in possible antitrust cases, to formulate the competitive effects theory, and to analyze data. Civil antitrust litigation has become a joint effort of attorneys and economists.

Attacking the Problem

Experience has shown that even apparently straightforward antitrust cases may resist easy analysis. A legal approach, fitting case law to the matter at hand, is often difficult without economic analysis. Likewise, economic reasoning, no matter how elegant, will not suffice unless firmly grounded in the facts. The first steps of economic analysis in antitrust litigation are the most important ones.

Secretariat Economists begins by identifying and analyzing those issues most critical to the outcome of the economic case. Later work builds upon this understanding. This approach produces a sound economic analysis consistent with the legal strategy.

Secretariat Economists professionals have analyzed many industries. As a result of this industry background and Secretariat Economists’ experience with a variety of economic issues, Secretariat Economists professionals are likely to have a running start on a given case. More importantly, Secretariat Economists has developed efficient techniques to gather accurate information on the subtleties of any market.

Further, as the field of antitrust continues to develop, new issues come to the fore. The experience of Secretariat Economists professionals enables them to address these new issues. For example, the antitrust agencies increasingly pursue investigations on issues concerning industries with differentiated products. Antitrust questions in differentiated products industries often require extensive quantitative analysis as antitrust agencies utilize sophisticated econometric models in their analyses. Secretariat Economists professionals are well versed in state-of-the-art econometric techniques and have estimated econometric models in several cases involving differentiated products.

The figure illustrates the Herfindahl-Hirschman index for a four-firm industry. The contribution of each firm (a,b,c,d) and its relative importance in the industry is represented by a square. The two rectangular areas (a x b) represent the change in the HHI due to a merger between firms a and b.

Antitrust Litigation

Antitrust litigation is an important part of Secretariat Economists’ practice. Secretariat Economists professionals have participated as consultants in private and government antitrust cases, on such issues as monopolization, price fixing, dealer termination, price discrimination, vertical restraints, and predation. EI economists have consulted with private litigants and testified about market definition, market power, competitive impact, business justifications, and damages.

Secretariat Economists professionals have had more than 100 years of combined employment experience at the Department of Justice and the Federal Trade Commission. With this first-hand experience, Secretariat Economists I understands the concerns and requirements of antitrust enforcement officials. Secretariat Economists can assess the likelihood of government involvement in a contemplated action, enabling the client to make well-informed strategic decisions.

Because of its experience, Secretariat Economists can help attorneys review required filings for deficiencies that could cause delay and misunderstanding. By focusing the analysis on the important issues in a timely manner, Secretariat Economists presentations of economic arguments to the enforcement agencies have helped to terminate merger investigations before the “second request” stage.

In addition to their federal antitrust experience, Secretariat Economists professionals also have significant experience dealing with, and working for, state and foreign antitrust enforcement agencies.

Experience

Secretariat Economists has experience with practically every antitrust issue on which an economist can counsel and testify, including the following:

• Codes of Ethic
• Deceptive Advertising
• Entry
• Essential Facilities
• Exclusive Dealing
• Failing Firm
• Information Exchanges
• Joint Ventures
• Lock-In
• Market Definition
• Market Share and Market Power
• Mergers
• Monopolization
• Non-Compete Clauses
• Predatory Practices
• Price Discrimination
• Price Fixing
• Standards
• Tying Arrangements
• Vertical Restraints

Overview

In the United States, mergers are typically challenged under Section 7 of the Clayton Act, which prohibits transactions “where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” The merging parties’ premerger notification obligations to the antitrust agencies are governed by the Hart-Scott-Rodino Act, whose filing requirements are triggered when the value of the transaction exceeds certain dollar thresholds.

Secretariat Economists professionals have more than 100 years of combined employment experience at the Department of Justice and the Federal Trade Commission, and frequently serve as private consultants to merging parties. With this first-hand experience, Secretariat Economists understands the concerns and requirements of antitrust enforcement officials. Secretariat Economists can assess the likelihood of government involvement in a contemplated action, enabling clients to make well-informed strategic decisions. EI’s expertise and experience encompasses all phases of the process, including assessing the antitrust risk of proposed merger, navigating discovery procedures, and describing the likely competitive effects of a transaction before competition authorities in the US and internationally. By focusing key issues in a timely manner, EI presentations of economic arguments to the enforcement agencies have helped to terminate merger investigations before the “second request” phase.

Secretariat Economists professionals apply rigorous analytical methods to complex data, including merger simulation techniques (game-theoretic models that yield quantitative predictions of competitive effects) advocated in the 2010 Horizontal Merger Guidelines. Secretariat Economists professionals apply these methods to evaluate the likely effects of proposed mergers on prices, costs, and competition, while accounting for divestitures, merger-driven efficiencies, product repositioning, and other factors.

Overview

Secretariat Economists provides expertise at all stages of the employment litigation process, including class certification, liability analysis, and the estimation of economic damages. We assist our clients with sworn testimony, written reports and economic analyses tailored to be easily understood by any audience, including judges, juries and regulatory agencies such as the EEOC or OFCCP.  Secretariat Economists provides rigorous statistical and economic analysis of employment decisions to help assess the risk of litigation, determine the merits of alleged wrongful acts, and compute the potential economic impact of alleged violations.

Secretariat Economists’ Labor and Employment Experience and Services

Secretariat Economists’ experts in the field of labor and employment have a distinguished record of providing clients with statistical and economic assistance in litigation-related matters. We pride ourselves on providing our clients with creative solutions to complex economic problems. Secretariat Economists professionals have testified in both class action and individual cases, in arbitration hearings, and at “Teamsters Hearings.” Secretariat Economists has also prepared damages estimates for use in settlement negotiations and routinely participates in mediation proceedings.

Many labor and employment matters involve allegations of discrimination due to applicants’ or employees’ gender, race/ethnicity, age or other protected status. The specific employment practices at issue may include compensation, promotion, termination, hiring or performance assessment. Our experts use the available data to study the claims of adverse treatment or impact as well as to address issues related to class certification, such typicality or common proof of impact.

In recent years, there has been a surge in litigation related to violations of the federal Fair Labor Standards Act (FLSA) as well as similar wage and hour laws at the state level. The economists at Secretariat Economists have extensive experience analyzing allegations related to off-the-clock work, misclassification of exempt status, missed meal or rest periods and miscalculation of the regular rate of pay.

Secretariat Economists professionals also estimate damages claims in employment-related litigation. Damages estimation in employment-related litigation often requires addressing topics such as the appropriate risk factor for discounting future earnings, the economically valid rate of prejudgment interest, the methodology for valuating fringes benefits, and mitigation earnings. Analysis of life expectancy and employment expectancy may also be embedded in the analysis.

Examples of Consulting Engagements include the following:

Title VII/EPA/ADEA/Discrimination

• A major computer manufacturer was faced with allegations of Title VII violations, specifically involving discriminatory compensation and promotions. An economist at Secretariat assisted the computer manufacturer with the production of voluminous data and conducted statistical analyses of compensation, promotions and estimates of potential economic exposure.
• In the matter of Tammy Garcia v. MAKO Surgical Corporation, a Secretariat Economists professional was retained on behalf of the plaintiff to compute economic damages relating to an alleged unlawful termination on the basis of gender.
• In Johnny Reynolds v. State of Alabama, a Secretariat Economists professional testified at a judicial hearing regarding the relevancy of a race-based consent decree with respect to the hiring of African-American employees by state government agencies.
• Secretariat Economists professionals have been retained to evaluate statistical disparities in hiring, promotions, training opportunities and reductions-in-force between older workers and their younger counterparts.
• In a disparate treatment matter against an international professional services firm, a Secretariat Economists professional conducted statistical and damages analyses on behalf of the plaintiff, a high ranking employee.

Wage and Hour

• In the Coordinated Proceedings for Sutter Health Wage and Hour Cases, a Secretariat Economists professional submitted sworn testimony regarding the applicability of plaintiffs’ analyses for purposes of class certification.  Class certification was later denied.
• In Johnson v. Big Lots Stores, Inc., the testimony of an economist at Secretariat Economists resulted in the decertification of an FLSA collective action relating to the alleged misclassification of exempt status of store managers and assistant store managers.
• In Selene Prado v. Warehouse Demo Services et al., class certification was awarded to plaintiffs based in part on analyses conducted by an economist at Secretariat Economists.
• A national landscaping company retained an economist at Secretariat Economists to calculate the economic impact relating to the miscalculation of the regular rate of pay when calculating employee’s overtime. Secretariat Economists professionals’ also calculated the financial impact regarding the validity of the fluctuating work week method of paying overtime.
• A major financial institution named in multiple collective actions involving alleged violations of California’s labor code (including pay stub violations, deductions, wait-time penalties, overtime, and meal and rest periods) retained an  economist at Secretariat Economists to prepare estimates of economic loss for use in mediation and settlement.
• An economist at Secretariat Economists was retained for purposes of calculating potential overtime pay in a lawsuit involving the alleged misclassification of first-line field supervisors at a national telecom company.
• Secretariat Economists professionals have been routinely engaged to provide estimates of the amount of alleged “off-the-clock” work and the associated amount of economic loss for employees working as customer service representatives, internal sales representatives, manufacturing workers and first-line supervisors, among other occupations.

Click here for information about Secretariat Economists services related to monitoring and auditing of businesses’ employment decisions for compliance with labor laws and regulations.

Overview

The health care industry has undergone dramatic change over the past 25 years. Two forces in particular—the rapid growth of managed care and government efforts to reduce the growth of health care expenditures—have contributed substantially to the changing nature of health care markets. Managed care plans have attempted to control health care costs by affecting patterns of health care delivery. The federal government’s prospective payment system for Medicare has also altered the delivery of services to some of the most intensive users of the health care system.

Many providers have engaged in mergers and vertical agreements in response to cost containment pressure from health insurers and government payers. Hospital care in particular has been affected by payors’ efforts to reduce costs. Hospitalization of patients has declined dramatically, leading to lower hospital censuses and reduced average lengths of stay. At the same time, outpatient hospital service, ambulatory surgery centers, home health care providers and the like have experienced rapid growth. As a result, the hospital sector has undergone extensive consolidation as hospitals bid for managed care contracts and try to operate more efficiently.

Relationships among different types of providers have also changed markedly. Hospitals and physicians have joined forces through physician-hospital organizations. In addition, many independent physicians and physician groups have merged or have joined together to compete for business from managed care companies.

The health care insurance industry has also evolved with the rapid growth in managed care despite some retrenchment regarding network openness. HMO and PPO plans have attracted a significant share of the insured population, many of whom have switched from traditional indemnity plans. In response, many of the traditional plans have begun to offer managed care options. These changes have spurred significant consolidation in the health insurance industry.

The transformation of the health care industry has raised a number of interesting and difficult antitrust issues stemming from consolidation as well as conflict among market participants. Timely analysis of these issues requires microeconomic skills and solid institutional knowledge of the health care industry.

Secretariat Economists professionals have broad experience in health care antitrust and regulation. While serving in government, they helped shape health care antitrust policy, including the statements of policy enforcement for health care issued by the Department of Justice and Federal Trade Commission. They have also provided support for antitrust investigations and litigation.

Experience

Secretariat Economists’ involvement in the analysis of these matters has included assistance in litigation, presentations to state and federal regulatory authorities, testimony at trial, and a wide range of support for the completion of transactions or litigation including empirical analyses and collection and development of necessary data.

Secretariat Economists professionals have analyzed issues like the following:

• Competitive effects of mergers and joint ventures among general acute care hospitals, psychiatric hospitals, and hospital chains
• Joint bidding arrangements among hospitals for managed care contracts
• Vertical arrangements between hospitals and physicians and the competitive effects of physician networks
• Competitive effects of the denial of staff privileges to hospital-based and non-hospital-based physicians
• Competition between Blue Cross and for-profit health insurers
• Competition in the market for nursing services
• Mergers of home health care providers
• Competitive effects of health care coalitions and business purchasing groups
• Mergers or transactions involving HMOs and PPOs and the effects of PPO and HMO formation on the price and quality of health care
• Competitive implications of provider-controlled PPOs
• Vertical integration of health insurers and healthcare providers
• Mergers of pharmaceutical companies
• Competition in the hospital supply industry
• Competitive effects of state regulation of certificates-of-need
• Competitive effects of regulatory changes by the Health Care Financing Administration

If you are interested in learning more about the health care sector consulting services offered by Secretariat Economists, please contact: David Argue.

Overview

In today’s knowledge-based economy, an increasing share of corporate assets involves intellectual property, such as patents, copyrights, and trademarks. In addition to these more traditional intangible assets, intellectual property has evolved over time to include other “assets” like business processes, the logic of software, and even the “look and feel” of Internet web pages. Given the growing importance of intangible assets like these, it is not surprising that commercial litigation increasingly entails disputes over intellectual property.

Intellectual property litigation includes aspects of both liability and damages. In patent disputes, for example, judges and juries are asked to determine liability issues such as whether or not a product or process is patentable, or whether the language of the patent is overly broad. These issues can be extremely complex, especially in high-tech industries like biotechnology. On the damages side, the issues can be similarly difficult, including valuing the profit potential of products still in early stages of development.

Secretariat Economists’ Intellectual Property Experience and Services

The complex nature of intellectual property disputes creates a pressing need for expert advice. Secretariat Economists professionals are well situated to address a broad range of economic issues in such disputes, including valuing intangible assets, understanding the role of markets and competition on the value of intellectual property, and estimating damages arising from infringement. Secretariat Economists professionals combine their extensive industry experience with strong microeconomic principles to provide well-reasoned analyses of intellectual property matters.

Secretariat Economists also can assist clients in a non-litigation setting. Like any other corporate asset, intangible assets should be evaluated and managed in such a way as to maximize their value to the owner. Secretariat Economists professionals work with clients to understand and estimate this value and to develop strategies, such as licensing or outright sale, that can enable clients to realize this maximum value.

Economists at Secretariat Economists have been active in advancing the debate between antitrust concerns and intellectual property rights. While patents are intended to encourage innovation by protecting the rights of inventors, patents have the potential of unduly limiting competition. If patents are overly broad, or extend for too long a period of time, these anticompetitive concerns may outweigh the innovation-inducing benefits. This is a debate that may shape the future of both patent protection and competition analyses.

Overview

Historically, economic analysis has seldom been used at the class certification stage, being left instead for the examination of the merits of the case. That pattern has changed, however, as sophisticated economic analyses have become increasingly accepted by the courts for class certification purposes. These analyses have been shown to contribute to the courts’ understanding of the issues and have affected class certification outcomes. Economic analysis of transactions data may reveal whether the proposed classes meet the requirements for being certified. Some of these same economic analyses also can help to educate the court about the issues likely to come before it in the liability phase of the case.

Often, the databases at issue in class certification matters have millions of records covering many parties and spanning multiple time periods. An important element in the successful use of these data at the class certification stage is to frame the economic issues properly. In addition, it is important to have the technical competence and capabilities to handle large, often unwieldy, databases.

Experience

Secretariat Economists has both the analytical skills and the computer resources to read, process, and analyze large, complex databases. Secretariat Economists has been involved in economic analysis for class certification in a number of cases, including the following:

• American Seed Co., Inc. v. Monsanto Company
• Butt v. Allegheny Pepsi-Cola Bottling and Mid-Atlantic Coca-Cola Bottling
• MacDunnah’s Inc. d/b/a The Fiddlehead Restaurant and the State of Alaska v. Amerigas Propane, Inc
• In Re: Baby Food Antitrust Litigation

Overview

Litigation and settlement negotiations often entail the valuation of competing damage claims. Damages can typically be thought of as the financial difference between what “would have” happened but for an allegedly wrongful act and what actually happened. Accordingly, damage estimation usually involves both theoretical construction of events that never occurred and accurate assessment of what did occur. Economic damage claims can only be evaluated and analyzed using economic analysis. Secretariat Economists professionals and financial analysts combine the skills needed to estimate damages and present the results in court or settlement negotiations. They use economic modeling, econometric estimation, and accounting techniques to produce sound and understandable presentations. Secretariat Economists personnel have analyzed damage claims and presented testimony relating to damages in federal and private antitrust cases, Lanham Act cases, breach of contract cases, breach of fiduciary duty cases, and other civil litigation matters.

Experience

Secretariat Economists’ damage analyses have proved persuasive in numerous matters such as these:

• Home Shopping Network v. GTE
• Alpo v. Ralston Purina
• R&D Business Systems, et al., v. Xerox Corporation
• Oncor and VAC v. AT&T
• Robert H. Kressin v. Bell Atlantic Mobile Systems, Inc.
• Trans-Alaska Pipeline Liability Fund
• Lunkenheimer v. PGL/Tomkins
• McNeil v. National Football League
• Folger Adam v. PMI Industries, Inc., et al.
• Cool Light Company, Inc., v. GTE Products Corporation
• Telecell Cellular, et al., v. GTE Mobilnet