Antitrust Law Daily Wrap Up, ANTITRUST—D. Tenn.: Direct purchasers’ expert testimony excluded in pool products price fixing suit, (Feb 24, 2016)

By Linda O’Brien, J.D., LL.M.

In an action by purchasers of pool products, alleging a price fixing conspiracy between Pool Corporation—the country’s largest distributor of pool products—and pool products manufacturers, the opinions of the direct purchaser plaintiffs’ economist expert, relating to the definition of a national relevant geographic market and causation analysis, were excluded by the federal district court in New Orleans (In re Pool Products Distribution Market Antitrust Litigation, February 22, 2016, Vance, S.).

Pentair Water Pool and Spa, Inc., Hayward Industries, Inc., and Zodiac Pool Systems, Inc. are the three largest manufacturers of pool products in the United States. After an investigation by the FTC into Pool Corporation’s alleged unfair methods of competition resulted in a consent decree, pool product purchasers filed suit against the three manufacturers and Pool Corp., claiming that the companies engaged in a price fixing conspiracy.

A nearly $10 million settlement between the direct purchaser plaintiffs (DPPs), Hayward, and Zodiac received final approval in June 2015. On January 20, 2016, a $6 million settlement between pool product maker Pentair Water Pool and Spa and the DPPs was given final approval. On January 28, 2016, the court dismissed the DPPs’ horizontal conspiracy claim. Before the court was Pool Corp.’s motion to exclude the testimony of the DPPs’ expert.

Spatial integration. The plaintiffs’ economist expert’s opinion that Pool’s prices should have been “spatially integrated” across the country, in defining the relevant geographic market as the United States, was excludable as unreliable. There was no evidence that Pool shipped products from one branch to another for the purpose of maximizing profits and no calculations to support the expert’s results of his “cointegration test” that Pool’s prices were spatially integrated.

The expert’s aggregated causation analysis of the impact of individual alleged events was inconsistent with the DPPs’ vertical conspiracy claims and was excluded. The aggregate analysis did not demonstrate whether any of the three vertical conspiracies had an anticompetitive effect on the relevant market or explain how the alleged collusion between Pool and the manufacturers injured competition, in the court’s view.

Centralized pricing. However, the expert’s opinion that (1) Pool used a tightly-controlled centralized system to determine prices across geographical regions, products, and customers and (2) Pool’s supracompetitive pricing caused impact to all class members would be allowed. Pool’s argument that its prices were set at the local branch level on a customer-by-customer, product-by-product basis was rejected. According to the court, the expert’s report cited numerous internal Pool documents, showing some level of centralized control over pricing during the class period.

The plaintiffs’ expert’s use of a before-and-after analysis to calculate the plaintiffs’ damages was not excluded. The defendant did not dispute that the before-and-after analysis was an accepted methodology to estimate overcharge damages and any collusion that occurred during the expert’s chose benchmark period did not make the analysis unreliable.

Finally, the expert’s proposed method for calculating individual damages for class members was allowed. The expert’s use of a regression model that included a measure of prediction error and median overcharges, instead of individualized overcharge estimates, was sufficient to provide a reasonable estimate of individual damages, the court concluded.

The case is No. 2:12-md-02328-SSV.

Attorneys: Russ M. Herman (Herman, Herman, Katz & Cotlar, LLP) for Direct Purchaser Plaintiffs' Liaison Counsel. William Bernard Gaudet (Adams & Reese, LLP) for Defendants' Liaison Counsel. David H. Bamberger (DLA Piper, LLP) for Defendants' Lead Counsel.

Companies: Pool Corporation

Cases: Antitrust LouisianaNews