Daubert and Antitrust Economics, Or When Should An Antitrust Economist Have Training in Economics?
Judge Saris’s district court opinion denying the motion to exclude one of the plaintiff’s economic experts in Natchitoches Parish Hospital v. Tyco International recently came across my desk. It is an interesting case involving allegations that Covidien, a leading supplier of “sharps containers” used for the disposal of various needle-involving medical products (syringes, IVs, etc.) violated the antitrust laws with various market share discounting arrangements with buyers and exclusive dealing contracts with GPOs. I’ve not been following this litigation very closely, which has now apparently survived summary judgment. What caught my eye was a passage from the Daubert opinion to exclude Professor Einer Elhauge’s expert economic testimony on behalf of the plaintiff. As an interesting side note, we’ve had occasion to opine ourselves on some of Professor Elhauge’s views on the related topic of loyalty discounts here. If you’d like to get caught fully up to speed, read the briefs. I’ll start you off with the motion to exclude , the opposition, and a declaration submitted by John Bates Clark Medal / Nobel Prize winner Daniel McFadden in support of the motion to exclude.
The basis for the motion to exclude is that, in effect, Professor Elhauge is untrained as an economist and / or as an econometrician. The brief uses stronger language. But the basic point is that Professor Elhauge has, according to the brief, taken a few introductory undergraduate economics courses and a law school law and economics course and, again according to the brief, submitted an expert report with various errors (primarily of a statistical and econometric nature, as I read the brief and the McFadden declaration). Holding aside the substantive issues concerning the alleged methodological errors, on the issue of expertise and qualifications, the opposition brief argues that:
Tyco’s claim that Prof. Elhauge is not qualified to offer an opinion in this case is groundless, and ignores: a) Prof. Elhauge’s particular expertise in antitrust economics, b) his extensive economic qualifications, and c) his peer-reviewed economic articles, textbooks and service on law and economic advisory boards. Moreover, numerous courts (and the U.S. Congress) have qualified Prof. Elhauge to testify on the very same issues as those involved in this case.
On point (a) in particular, the brief elaborates:
It is in fact, exactly what Prof. Elhauge identifies as his area of expertise: antitrust economics, which he defines as “the application of economic principles and methods to antitrust issues.” Elhauge Dep. at 8, see also Elhauge Declaration at 99.5. He testified at his deposition that he considers this discipline to be distinct from economics in general. Dep. at 8. He also qualified his statement that he is not an econometrician by defining that person as someone who “specializes in developing methodologies for [statistical] analysis of economic problems,” and stating that he applies econometric methods to various issues, but he is not a “scholar who develops methodology in econometrics.” Dep. at 9. The specific expertise required for this case is the practical application of economic principles to antitrust theory – not the scholarly development of econometric models or expounding on economic theories in general or performing economic tasks for their own sake.
The brief goes on to argue that the defendants have ignored Professor Elhauge’s qualifications in the distinct area of “antitrust economics,” including:
a peer-reviewed economics article on loyalty discounts published in the Journal of Competition Law & Economics; several other published antitrust economics articles; peer-reviewed textbooks on antitrust law and economics; being selected as the editor of the Research Handbook on the Economics of Antitrust Law; co-authoring a volume of the Areeda antitrust treatise that covered both law and economics of tying; and serving on a number of law and economic advisory boards.
Here’s how the court frames and then resolves the economic qualifications debate:
As a threshold matter, defendants have challenged Professor Elhauge’s credentials because he holds no academic degrees in economics. He currently teaches antitrust, contracts, and corporations at Harvard Law School but has never taught a class in economics or statistical modeling. undergraduate courses on economics, he majored in science. took only one graduate level course on the economic analysis of legal issues. Based on this background, defendants contend he is not qualified to perform regressions and other technical statistical analyses. …
Defendants’ argument is unpersuasive. While he is not qualified as an expert in economics generally speaking or econometrics, Professor Elhauge is qualified in the narrower field of antitrust economics. Professor Ashenfelter, who is an expert in econometrics, pinpointed no methodological flaws or technical errors in the econometric analysis that Professor Elhauge presented. (Report at 1, 25). In the comments on the report, defendants do not refute this conclusion. As the validity of the econometric methodology is not an issue in the case, the lack of econometric/economic credentials affects the weight, not the admissibility, of Professor Elhauge’s testimony.
It would take a much larger investment on my part than I am willing or able to make at the moment to evaluate the underlying econometric battle on the merits (but do see the exchange between McFadden and Elhauge), but on the point of witness qualifications, the opinion seems quite problematic. As an absolute matter, it is certainly true that possession of a Ph.D. in economics is neither a sufficient condition to testify in all issues arising in antitrust litigation nor a necessary condition to testify as an expert witness. But it also seems to be a fairly sensible default presumption to assume that a potential expert witness without formal training in the economic methods providing the basis for his expert opinions is not qualified to offer those opinions pending compelling evidence to the contrary. So, I guess that takes us right into the nitty gritty, doesn’t it?
While Professor Elhauge is as highly qualified an antitrust legal scholar as they come, and one that I greatly respect, I just don’t see it. The only qualification on the list that seems relevant to the existence of the underlying skills required to offer the theoretical and statistical expert evidence in the case is the peer-reviewed journal publication in the Journal of Competition Law & Economics. While the JCLE is a very nice journal, and one that I’ve published in once and have a second article forthcoming in for 2010, I just don’t see how this publication alone provides the basis for econometric testimony without the underlying training (with or without a Ph.D.). The Antitrust Law Journal is also peer reviewed and publishes work by economists, law professors and practitioners. Is every antitrust lawyer who has published in either the JCLE or Antitrust Law Journal qualified under the court’s standard? What would it take for a lawyer with a publication in one of these journals not to satisfy the court’s Daubert standard?
I’m completely unpersuaded as to the relevance of authoring law school textbooks and treatise chapters that discuss the underlying economics as a qualification to offer expert testimony grounded in economic training — much less statistical work. Again, the court’s overall approach seems to imply that “antitrust economics” is something anyone can do–it’s not real economics; it’s just law with a little bit of talk about demand curves and prices. Maybe this is a predictable consequence of the empirical bubble in legal scholarship? Perhaps lawyers, and judges, believe that the economics / econometrics is largely control over some jargon and knowing how to hit the right buttons on a statistical software package. Nothing that a smart and talented lawyer couldn’t teach themselves over Spring Break.
The court’s analysis seems particularly troublesome in this regard. As I read the passage above, Judge Saris (adopting the plaintiff’s argument) identifies “antitrust economics” as a sub-field of “economics” in which the expertise required to satisfy Daubert can be established in the absence of any expertise in economics generally or statistical methods. Now, one can see this argument running in the other direction. For example, I might consider myself to have some expertise in economics generally because I have a Ph.D. in economics, but would not consider myself an expert in macroeconomics, labor economics, or international trade. Similarly, even within the field of industrial organization, and further within the sub-field of antitrust economics, there are specialized areas where I would not consider myself to have the relevant expertise to offer expert testimony. Generalized economic training does not always translate to specifically tailored expertise in the narrow issue of interest. However, the argument here is that the lack of general economic training is no obstacle to producing narrowly tailored testimony within the sub-field of “antitrust economics.” That doesn’t make any sense to me, and again, equates antitrust law and antitrust economics in a manner that strikes me as at tension with the purposes of Daubert.
I’ve got some more thoughts on this issue, particularly as it relates to the court’s use of an independent court appointed expert (I believe in this case settled upon by both parties) to arbitrate the Daubert dispute, and to some of my own research agenda involving the burdens placed on generalist judges to understand complex economic evidence. More on those issues later. For now, just some questions. I’ve been critical of the district court’s approach here. Do others find it a sensible approach? Perhaps I’m just protecting the guild. If Daubert is not the answer here, and it certainly comes with its costs, what other solutions are there? Are court appointed experts a reasonable partial solution to help resolve Daubert-related disputes?