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From Antitrust Law Daily, October 7, 2014

Optical disc drive purchasers unable to show class-wide antitrust injury, damages

By Greg Hammond, J.D.

Direct and indirect purchasers of optical disc drives (ODDs) were unable to establish viable methodologies for establishing class-wide antitrust injury and damages, in multi-district litigation against ODD manufacturers and sellers. Since the purchasers were unable to demonstrate that common questions of law or fact predominated, the federal district court in San Francisco denied their motions for class certification (In re Optical Disk Drive Antitrust Litigation, October 3, 2014, Seeborg, R.).

Background. Optical discs, such as CDs and DVDS, are mediums for storing data. ODDs are devices that allow data to be read from and written to optical discs. The ODD devices can be standalone products or can be incorporated into other products, such as computers. During the putative class period, prices for ODDs were generally marked by steep declines. Direct and indirect purchasers of ODDs filed separate complaints against various manufacturers and sellers of the products—including Sony Corp., LG Electronics, Inc., Toshiba Corp—alleging that the defendants conspired to fix the prices of ODDs between 2004 and 2009. Both the direct purchaser plaintiffs (DPPs) and indirect purchaser plaintiffs (IPPs) moved for class certification.

DPPs’ motion for certification. The proposed DPP class, according to the court, “consists of those who purchased ODDs, either as standalone products or as products that were incorporated into desktop or notebook computers, directly from a defendant, or its subsidiary or affiliate, but not those who purchased ODDs from entities other than the alleged conspirators.” In considering the Rule 23(a) factors, the court first determined that there was no dispute that the number of direct purchasers of ODDs plainly satisfied the numerosity requirement. In addition, it was presumed that sufficient commonality existed to satisfy subdivision (a). However, the typicality and adequacy requirements were not met, because the putative class encompassed a myriad of other ODD purchasers whose volumes and means of ODD purchases do not compare.

The court also discussed the Rule 23(b) requirements for the DPPs to show that questions of law or fact common to the members of the class predominated, and that the class action was superior to other available methods for the fair and efficient adjudication of the controversy. With regard to predominance, the DPPs were required to satisfy the requirement with respect to three key elements, including: (1) whether there was a conspiracy to fix prices in violation of the antitrust laws; (2) the fact of plaintiffs’ antitrust injury, or “impact” of defendants’ unlawful activity; and (3) the amount of damages sustained as a result of the antitrust violations.

First, the court determined that, despite questions as to how the DPPs intended to prove the conspiracy they alleged, the existence or non-existence of the conspiracy was a question that predominated. Nevertheless, the DPPs were unable to establish antitrust injury or damages through their expert, Dr. Gary French. Although French provided factors that show anticompetitive activity existed in the industry, the factors did not establish class-wide impact. Further, French’s methodologies, which attempted to show that all or nearly all of the purchasers were overcharged, made no attempt to establish, but instead simply assumed, class-wide impact. The DPPs’ method of calculating damages also was “badly flawed,” according to the court, as a purchaser of an expensive computer would be found to have suffered far more damage than a purchaser of a bargain computer, even if the ODDs installed in each were identical.

Finally, the court concluded that the superiority requirement of Rule 23(b) was not met, given the differences between the DPPs. The court noted that, “[i]f the class were composed solely of individuals and small entities that purchased ODDs at retail list prices, then the usual presumption of the superiority of a class action for such claims likely would apply.” However, DPPs in this case included Dell and HP, which accounted for nearly half of the defendants’ dollar value sales, as well as other major distributors that accounted for another 37.8 percent of sales. The named DPPs in this case, however, were three small companies and four individuals. Consequently, the DPPs’ motion for class certification was denied.

IPPs’ motion for certification. The IPPs’ motion for class certification failed for similar reasons. Specifically, the court found that although the IPPs satisfied the numerosity, commonality, typicality, and adequacy factors of Rule 23(a), the IPPs failed to demonstrate that antitrust injury and resulting damages could be shown on a class-wide basis. Similar to the DPP analysis, the court found that the IPPs’ expert’s analysis—demonstrating a relatively high correlation between prices across customers and across different types of ODDs—did not account for the fact that such correlations would exist anyway, given the steadily declining prices of ODDs during the relevant period. Further, the expert’s analysis also assumed class-wide impact, rather than demonstrating antitrust injury through results.

The case number is 3:10-md-2143 RS.

Attorneys: John F. Cove, Jr. (Boies Schiller & Flexner LLP) for Sony Corp. Ameri Rose Klafeta (Eimer Stahl LLP) for LG Electronics, Inc. Casandra Leann Thomson (Latham & Watkins LLP) for Toshiba Corp.

Companies: Sony Corp.; LG Electronics, Inc.; Toshiba Corp.

MainStory: TopStory Antitrust CaliforniaNews

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