Economic consulting

Last updated

Economic consulting is the practice of providing advanced economic, financial, and statistical analysis for use in a litigation environment. Law firms, state institutions, and other organizations may rely on economic consultants to produce research, analyses, reports, and testimony to be used in trial.

Contents

Economic consulting consists of providing economic expertise in a variety of areas, including but not limited to antitrust; bankruptcy; energy; finance; healthcare; insurance; intellectual property; labor and employment; life sciences; media and entertainment; and securities. [1] , [2] , [3] , [4] , [5] , [6] Economic consulting firms often provide the support team when a client hires an economic expert. [7] The expert—typically a professor or a senior member of an economic consulting firm—will provide economic consulting by, for example, analyzing competitive effects, calculating damages, and testifying to one’s expert opinion before a judge, jury, arbiter, or government enforcement agency. [7] , [8]

History

Economic consulting began growing in the United States when, in 1936, the Department of Justice (DOJ) began employing economists to assist with its investigations and litigations of mergers and anti-competitive behavior. [9] Economic consulting firms began providing assistance to the companies being investigated and being sued by government agencies and their economists, and they soon began providing assistance to government agencies as well. [10] , [11]

By the turn of the 21st century, economic consultancies had gained prominence, and their reports were often part of the court record and the basis for the court’s opinions. [9] , [12] In the late 1990s, the DOJ, direct action plaintiffs, and class action plaintiffs sued an international cartel of vitamin manufacturers, accusing them of conspiring to inflate prices in what became the largest price-fixing case in US history at that time. [13] ,  In the class certification phase, the judge’s opinion cited evidence from both plaintiff and defendant economic experts regarding common impact of damages, price trends, and the structure of the vitamins industry. [14] This case was the first successful US prosecution of an international cartel. [15] Within a few years, even the Supreme Court was considering economic consulting work products to decide its cases. [16] , [17] [18] [19]

Function

Economic consulting services are generally divided into four types of services: conducting research; performing statistical and empirical economic analysis; responding to the opposing expert’s work; and preparing an expert report and supporting the expert during trial. [20] , [1] Consultants often begin by conducting research: they review materials provided in discovery, depositions, news articles, industry reports, and economic literature to gain industry knowledge and identify relevant information like the structure of the industry (e.g., competitors, relevant market size, competing products) and available data. [20] , [1] This work may occur at the beginning of litigation or in a consulting or pre-litigation phase. [21] , [1]

Consultants perform empirical analysis, often developing complex regression models to determine factors such as the impact of a proposed merger or price increases due to anticompetitive behavior. [20] , [8] Consultants further review the work of the other party in litigation, analyzing the validity of the opposing expert’s economic theory and analysis and often summarizing their expert’s work and opinions in an expert report. [20] Finally, if the case goes to trial, consultants support the expert during trial. [1]

Criticism

Economic consultants are sometimes accused of using “junk science” to help their clients. [9] , [11] In a 2016 speech, former Deputy Assistant Attorney General David Gelfand stated that economic consultancies often help him understand the complex economic issues underlying his cases. [9] However, Gelfand also observed that some economic consulting presentations and reports rely on p-hacking (misusing data analysis to find patterns in data that can be presented as statistically significant) or misrepresent the evidence to support their client’s goals.

A 2016 ProPublica article noted that economic consulting is a million-dollar industry, with top economic experts billing at over $1,000 an hour. [11] Yet the experts’ reports are often confidential—meaning the public cannot scrutinize them—and their predictions often do not prove true. [11] The article’s authors credit the economic consulting industry with the decline in merger enforcement and the rise in market concentration. [11] Additional scrutiny has occurred when economic consulting firms have been found to be working on both sides of the same case. [11]

See also

Related Research Articles

<i>United States v. Microsoft Corp.</i> 2001 American antitrust law case

United States of America v. Microsoft Corporation, 253 F.3d 34, was a landmark American antitrust law case at the United States Court of Appeals for the District of Columbia Circuit. The U.S. government accused Microsoft of illegally maintaining its monopoly position in the personal computer (PC) market, primarily through the legal and technical restrictions it put on the abilities of PC manufacturers (OEMs) and users to uninstall Internet Explorer and use other programs such as Netscape and Java.

<span class="mw-page-title-main">United States antitrust law</span> American legal system intended to promote competition among businesses

In the United States, antitrust law is a collection of mostly federal laws that regulate the conduct and organization of businesses to promote competition and prevent unjustified monopolies. The three main U.S. antitrust statutes are the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914. These acts serve three major functions. First, Section 1 of the Sherman Act prohibits price fixing and the operation of cartels, and prohibits other collusive practices that unreasonably restrain trade. Second, Section 7 of the Clayton Act restricts the mergers and acquisitions of organizations that may substantially lessen competition or tend to create a monopoly. Third, Section 2 of the Sherman Act prohibits monopolization.

The Herfindahl index is a measure of the size of firms in relation to the industry they are in and is an indicator of the amount of competition among them. Named after economists Orris C. Herfindahl and Albert O. Hirschman, it is an economic concept widely applied in competition law, antitrust regulation, and technology management. HHI has continued to be used by antitrust authorities, primarily to evaluate and understand how mergers will affect their associated markets. HHI is calculated by squaring the market share of each competing firm in the industry—expressed as either fractions, decimals, or whole numbers—and then summing the resulting numbers. The result is proportional to the average market share, weighted by market share. As such, it can range from 0 to 1.0, moving from a huge number of very small firms to a single monopolistic producer. Increases in the HHI generally indicate a decrease in competition and an increase of market power, whereas decreases indicate the opposite. Alternatively, the index can be expressed per 10,000 "points". For example, an index of .25 is the same as 2,500 points.

Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust law, anti-monopoly law, and trade practices law; the act of pushing for antitrust measures or attacking monopolistic companies is commonly known as trust busting.

Analysis Group, Inc. (AG), founded in 1981 by economists Bruce E. Stangle and Michael F. Koehn, is an economic consulting firm based in North America. It provides economic, financial, and strategic analysis and expert testimony to law firms, corporations, and government agencies.

In economics, market concentration is a function of the number of firms and their respective shares of the total production in a market. Market concentration is the portion of a given market's market share that is held by a small number of businesses. To ascertain whether an industry is competitive or not, it is employed in antitrust law and economic regulation. When market concentration is high, it indicates that a few firms dominate the market and oligopoly or monopolistic competition is likely to exist. In most cases, high market concentration produces undesirable consequences such as reduced competition and higher prices.

Merger guidelines in the United States are a set of internal rules promulgated by the Antitrust Division of the Department of Justice (DOJ) in conjunction with the Federal Trade Commission (FTC). These rules have been revised over the past four decades. They govern the process by which these two regulatory bodies scrutinize and/or challenge a potential merger. Grounds for challenges include increased market concentration and threat to competition within a relevant market.

<span class="mw-page-title-main">Christine A. Varney</span> American lawyer (born 1955)

Christine A. Varney is an American antitrust attorney who served as the U.S. assistant attorney general of the Antitrust Division for the Obama Administration and as a Federal Trade commissioner in the Clinton Administration. Since August 2011, Varney has been a partner of the New York law firm Cravath, Swaine & Moore, where she chairs the antitrust department.

In competition law, before deciding whether companies have significant market power which would justify government intervention, the test of small but significant and non-transitory increase in price (SSNIP) is used to define the relevant market in a consistent way. It is an alternative to ad hoc determination of the relevant market by arguments about product similarity.

The lysine price-fixing conspiracy was an organized effort during the mid-1990s to raise the price of the animal feed additive lysine. It involved five companies that had commercialized high-tech fermentation technologies, including American company Archer Daniels Midland (ADM), Japanese companies Ajinomoto and Kyowa Hakko Kogyo, and Korean companies Sewon America Inc. and Cheil Jedang Ltd. A criminal investigation resulted in fines and three-year prison sentences for three executives of ADM who colluded with the other companies to fix prices. The foreign companies settled with the United States Department of Justice Antitrust Division in September through December 1996. Each firm and four executives from the Asian firms pleaded guilty as part of a plea bargain to aid in further investigation against ADM. The cartel had been able to raise lysine prices 70% within their first nine months of cooperation.

<span class="mw-page-title-main">CRA International</span> American consultancy firm

Charles River Associates is a global consulting firm headquartered in Boston. The firm provides expert testimony and litigation support, strategic advice, and analysis to law firms, corporations, accounting firms, and governments.

<span class="mw-page-title-main">Katherine B. Forrest</span> American lawyer and former judge (born 1964)

Katherine Bolan Forrest is a partner at New York law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, and a former United States district judge of the United States District Court for the Southern District of New York.

<span class="mw-page-title-main">Berkeley Research Group</span> Global Consulting Company

Berkeley Research Group, LLC (BRG) is a global consulting firm that helps organizations with assistance in disputes and investigations, corporate finance, and performance improvement and advisory. BRG is headquartered in Emeryville, California, with offices across the United States and in Asia, Australia, Canada, Latin America, the Middle East and the United Kingdom. As of January 2023, it has more than 1,300 employees across more than forty offices.

<span class="mw-page-title-main">William Baer (antitrust lawyer)</span> American lawyer

William Joseph Baer is an American lawyer who served as the Assistant Attorney General for the United States Department of Justice Antitrust Division under the administration of President Barack Obama. He is a partner at the American law firm Arnold & Porter, where he works in antitrust law and white collar defense. Since January 2020, Baer has been a visiting fellow in Governance Studies at the Brookings Institution.

<span class="mw-page-title-main">History of United States antitrust law</span>

The history of United States antitrust law is generally taken to begin with the Sherman Antitrust Act 1890, although some form of policy to regulate competition in the market economy has existed throughout the common law's history. Although "trust" had a technical legal meaning, the word was commonly used to denote big business, especially a large, growing manufacturing conglomerate of the sort that suddenly emerged in great numbers in the 1880s and 1890s. The Interstate Commerce Act of 1887 began a shift towards federal rather than state regulation of big business. It was followed by the Sherman Antitrust Act of 1890, the Clayton Antitrust Act and the Federal Trade Commission Act of 1914, the Robinson-Patman Act of 1936, and the Celler-Kefauver Act of 1950.

High-Tech Employee Antitrust Litigation is a 2010 United States Department of Justice (DOJ) antitrust action and a 2013 civil class action against several Silicon Valley companies for alleged "no cold call" agreements which restrained the recruitment of high-tech employees.

<span class="mw-page-title-main">Bates White</span> American economic consulting firm

Bates White LLC. is a privately held economic consulting firm specializing in advanced economic, financial, and econometric analysis. The firm was founded in 1999 and currently has one office in Washington, D.C., with about 250 employees. The firm provides economic consulting and expert testimony.

<span class="mw-page-title-main">Fiona Scott Morton</span> American economist

Fiona M. Scott Morton is an American economist who serves as the Theodore Nierenberg Professor at Yale School of Management. Her research in industrial organization has covered industries including magazines, shipping, pharmaceuticals, and internet retail. She served as associate dean of the Yale School of Management from 2007 to 2010, and she has won the school's teaching award twice.

<i>TFT-LCD (Flat Panel) Antitrust Litigation</i>

The TFT-LCD Antitrust Litigation was a United States class-action lawsuit regarding the worldwide conspiracy to coordinate the prices of Thin-Film Transistor-Liquid Crystal Display (TFT-LCD) panels, which are used to make laptop computers, computer monitors and televisions, between 1999 and 2006. In March 2010, Judge Susan Illston certified two nationwide classes of persons and entities that directly and indirectly purchased TFT-LCDs – for panel purchasers and purchasers of TFT-LCD integrated products; the litigation was followed by multiple suits.

<span class="mw-page-title-main">Jonathan Kanter</span> American lawyer (born 1973)

Jonathan Seth Kanter is an American antitrust attorney who has served as assistant attorney general for the Department of Justice (DOJ) Antitrust Division since November 16, 2021. Prior to this, Kanter worked as an antitrust attorney at the Federal Trade Commission (FTC) and in private practice.

References

  1. 1 2 3 4 5 "Careers in Economic and Litigation Consulting". UVA Arts & Sciences, Department of Economics. May 4, 2021. Retrieved May 4, 2021.
  2. ↑ In re Garlock Sealing Technologies, LLC , No. 10-31607 (Bankr. W.D.N.C. January 10, 2014), 6.
  3. ↑ 2020 NSUARB 39 M08195 decision, 4, 8.
  4. ↑ Lipman, Melissa (August 14, 2014). "AmEx Expert Cites 'Gaping Hole' In DOJ Antitrust Theory". Law360.
  5. ↑ Wilts, Alex (September 30, 2020). "Traditional hospital definition 'rapidly changing', Jefferson chief executive says". GCR.
  6. ↑ Weatherford, Larry (2021). So You Want to Learn about Economic Consulting: A Guide for College Students. Amazon. ISBN   9798702071350.
  7. 1 2 "Careers in Economic and Litigation Consulting". UVA Arts & Sciences, Department of Economics. May 4, 2021. Retrieved May 4, 2021.
  8. 1 2 Samuelson, Martha (Spring–Summer 2005). "The Business of Economic Consulting" (PDF). CSWEP Newsletter. pp. 1–2. Retrieved May 4, 2021.
  9. 1 2 3 4 US Department of Justice, "Deputy Assistant Attorney General David Gelfand Delivers Remarks at the Bates White Antitrust Conference," press release, June 6, 2016, https://www.justice.gov/opa/speech/deputy-assistant-attorney-general-david-gelfand-delivers-remarks-bates-white-antitrust
  10. ↑ "History". NERA Economic Consulting. August 4, 2021. Retrieved August 4, 2021.
  11. 1 2 3 4 5 6 Eisinger, Jesse; Elliott, Justin (November 16, 2016). "These Professors Make More Than a Thousand Bucks an Hour Peddling Mega-Mergers". ProPublica.
  12. ↑ Wilts, Alex (September 30, 2020). "Traditional Hospital Definition 'Rapidly Changing', Jefferson Chief Executive Says". GCR.
  13. ↑ Bendavid, Naftali (May 21, 1999). "Vitamin Price-Fixing Draws Record $755 Million in Fines". The Chicago Tribune.
  14. ↑ In re Vitamins Antitrust Litigation , 209 F.R.D. 251 (D.D.C. 2002).
  15. ↑ "Appendix A: Antitrust Division Selected Criminal Cases—April 1, 1996 through September 30, 1999—Vitamins". Department of Justice. June 25, 2015. Retrieved July 12, 2022.
  16. ↑ Kansas v. Colorado, 121 S.Ct. 2023, 2033, 533 U.S. 1, 18 (U.S., 2001).
  17. ↑ Berghuis v. Smith, 130 S.Ct. 1382, 1390, 559 U.S. 314, 323 (U.S., 2010).
  18. ↑ Google LLC v. Oracle America, Inc., 141 S.Ct. 1183 (U.S., 2021).
  19. ↑ Cavanagh, Edward D. (2004). "Illinois Brick: A Look Back and a Look Ahead". Consumer Law Review. 17 (1): 1–52.
  20. 1 2 3 4 "Economic Consultant: Who Are They and Why You Need to Know". Personal Branding Blog. May 7, 2015. Retrieved May 4, 2021.
  21. ↑ "Economic Consultant". BYU Economics. May 4, 2021. Retrieved May 4, 2021.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.