On April 26 and April 8, 2022, the Ninth Circuit, aided by AAI amicus briefs, handed victories to antitrust plaintiffs in two important cases involving platform markets and class certification, respectively, The PLS.com, LLC v. National Association of Realtors and Olean Wholesale Grocery Cooperative, Inc. v. Bumble Bee Foods, LLC (en banc).
In The PLS.com v. National Association of Realtors, a unanimous panel of the Ninth Circuit Court of Appeals ruled in favor of plaintiffs, reversing a district court opinion that held PLS had failed to state a claim against the National Association of Realtors (NAR). Before it was driven from the market by NAR’s conduct, PLS offered an alternative real estate listing service to NAR’s MLS, targeting listings with limited information, so-called pocket listings. AAI’s amicus brief argued two important points. First, antitrust plaintiffs are only required to allege harm to competition and direct purchasers from conduct, and are not required also to allege harm to end consumers. Second, AAI argued that the presence of network effects does not excuse exclusionary conduct by platforms.
The Ninth Circuit accepted both arguments. First, the panel held that in an antitrust context, “the term ‘consumer’ is not limited to ‘ultimate consumers.” Real estate agents, who are the buyers of network listing services are also consumers in an antitrust case. Second, as urged by AAI, the court rejected NAR’s argument that the presence of network effects implied that consumers would be better off with a single listing platform (NAR’s MLS) than multiple competing platforms. The opinion mirrored AAI’s argument in its brief that such an argument is directly contrary to the purpose of the antitrust laws and that consumers, not NAR, should be allowed to choose which products they prefer. If NAR’s arguments about the consumer benefits of its MLS were correct, then they would be a basis on which NAR could compete, not a basis for excluding its competitors.
The district court had also dismissed PLS’s claims on the basis that they failed to satisfy Ohio v. American Express (“Amex”). Specifically, the district court held that “PLS does not allege a plausible injury to participants on both sides of the market…both home sellers and home buyers.” On appeal, PLS argued that AmEx does not apply at the motion to dismiss stage or to networks that do not involve simultaneous transactions and that, in any event, it had alleged harm to both sides of the market. While AAI did not brief the Amex issues, the Ninth Circuit’s decision largely followed AAI’s work on Amex in other cases.
The Ninth Circuit held that Amex can apply at the pleading stage in certain rule of reason cases based on indirect evidence of anticompetitive effects, but that market definition (and, therefore, satisfaction of the Amex requirements for market definition) is never required for rule of reason claims based on direct evidence. Because PLS’s pleading of its claim based on indirect evidence satisfied Amex’s requirements, even if Amex did apply, the court found it unnecessary to decide “the more difficult questions the parties raise about how broadly the Amex decision applies.” Importantly, in holding that PLS had satisfied Amex by pleading harm to both buyers and sellers of homes, the court went out of its way to note that “Amex does not require a plaintiff to allege harm to participants on both sides of the market. All Amex held is that to establish that a practice is anticompetitive in certain two-sided markets, the plaintiff must establish an anticompetitive impact on the ‘market as a whole.’”
In Olean Wholesale Grocery Cooperative, Inc. v. Bumble Bee Foods, LLC, a district court certified three classes of purchasers, including direct purchasers and two groups of indirect purchasers, seeking to recover for the confessed criminal price fixing of the three leading producers of packaged tuna, Bumble Bee Foods LLC, Starkist, and Chicken of the Sea (“Tuna Suppliers”). In opposition to class certification, the Tuna Suppliers introduced rebuttal experts seeking to counter plaintiffs’ expert statistical analysis attempting to show that the price fixing caused widespread injury across the respective classes. The district court held a three-day evidentiary hearing and weighed the competing expert opinions, finding plaintiffs’ experts more persuasive. It held that plaintiffs’ common statistical evidence of impact was sufficient to help satisfy Rule 23’s predominance requirement, though it allowed that defendants could still challenge the admissibility and probative value of the evidence at trial.
On interlocutory appeal, the Tuna Suppliers, supported by the U.S. Chamber of Commerce and the Washington Legal Foundation, argued that the district court erred by refusing to definitively resolve the battle of the experts at class certification, and that plaintiffs’ expert’s statistical analysis was inherently problematic because it relied on the average overcharges to the classes, thereby masking the possibility that some of the class members were uninjured by the price fixing. The Tuna Suppliers maintained that, because plaintiffs’ expert evidence could not necessarily sustain a jury finding for every class member, it should not be a permissible means of establishing that common questions would predominate at a class trial.
In an amicus brief submitted last August, AAI argued that such evidence need only be relevant and reliable to be admissible; it does not have to assure that each plaintiff would prevail on the merits of the impact element in an individual action. Rule 23 requires only that common “questions” must predominate over individual questions at trial; it cannot be read to suggest that the questions’ answers must be determined as a prerequisite to class certification. Moreover, any uninjured class members may be identified after trial, and longstanding case law prevents defendants from capitalizing on the uncertainty created by their own illegal conduct, including uncertain damages calculations.
The AAI brief also argued that the court should unequivocally reject the defendants’ effort to cast categorical doubt on statistical analysis, and specifically regression modelling, in antitrust cases. Regression models frequently rely on averaging techniques, but that is not where they begin and end. Such models are routinely accepted as reliable methods of proving widespread injury to antitrust classes because econometric techniques can control for price changes caused by supply and demand factors and then focus on the uniformity of differences across class members to reliably show common impact.
All three judges on the merits panel adopted the position advocated by AAI in rejecting defendants’ categorical arguments on the use of statistical analysis and regression modeling to prove class-wide impact in antitrust cases. However, the three judges sided with defendants in holding that the district court erred by refusing to resolve the disagreement among the parties’ experts over the number of potentially uninjured members in the class. And the panel then split over the standard for determining whether the presence of uninjured class members may defeat predominance. The panel majority concluded that the district court, before certifying a class, must find that only a “de minimis” number of class members are uninjured. Judge Hurwitz, partially dissenting, maintained that neither the text of Rule 23 nor Ninth Circuit precedent permit the court to implement such a requirement.
In the aftermath of the panel opinion and partial dissent, neither party petitioned for panel or en banc rehearing, instead agreeing to accept remand. However, the court sua sponte ordered briefing on whether en banc hearing was warranted, and on August 3, 2021, it ordered rehearing. In a merits brief before the en banc Court, AAI argued that the defendants’ proposed predominance standard would undermine antitrust policy while contravening Supreme Court precedent, Ninth Circuit precedent, and the text of Rule 23.
The AAI en banc brief emphasized, first, that defendants’ proposed de minimis standard is inappropriate because, in many cases, common issues will predominate regardless of whether more than a de minimis percentage of class members were uninjured. Second, a de minimis rule does not follow from Article III standing doctrine, which is jurisdictional. Federal courts do not need to determine whether injury has occurred on the merits to determine whether they have the power to adjudicate the issue of injury. Third, Rule 23 does not require merits determinations, or resolving the battle of the experts, to assess whether class plaintiffs are capable of establishing injury using common evidence. According to binding precedent, plaintiffs’ evidence is sufficient if it could sustain a jury verdict.
On April 8, 2022, the en banc court affirmed the district court’s certification of all three classes, implicitly crediting and accepting numerous arguments put forward in the AAI brief. Like the merits panel, the en banc court flatly rejected the Tuna Suppliers’ argument that regression models involving “averaging assumptions” are inherently unreliable, noting that such approaches are widely accepted as a reliable econometric technique in antirust cases and are permissible under Tyson Foods. Moreover, the court was not persuaded by the Tuna Suppliers’ contention that averaging masked impact insofar as the price-fixed products at issue here were susceptible to individualized negotiations and differences in bargaining power among customers. The court held it is “both logical and plausible” to conclude “that the conspiracy artificially inflated the baseline for price negotiations.”
Accepting one of AAI’s principal arguments, the en banc court also rejected the Tuna Suppliers’ attack on the plausibility of plaintiffs’ use of averaging as applied to certain individual class members. The court held that the Tuna Suppliers’ argument “improperly conflates the question whether evidence is capable of proving an issue on a class-wide basis with the question whether the evidence is persuasive.” The court explained that “the question is whether each member of the class can rely on [the expert’s] model to show antitrust impact of any amount.” Here, the district court did not abuse its discretion in finding that each member could.
The court added, importantly, that “[w]hile individualized differences among the overcharges imposed on each purchaser may require a court to determine damages on an individualized basis, such a task would not undermine the regression model’s ability to provide evidence of common impact.” The court therefore rejected the Tuna Suppliers’ argument that the regression model could not “sustain liability in individual proceedings” on the question of impact in satisfaction of the Tyson Foods standard.
The court also considered and rejected the Tuna Suppliers’ contention that the district court was required to make a merits determination on whether the plaintiffs’ expert’s model was correct to ensure it did not improperly certify a class in which some members lack Article III standing. The court explained that “the class did not have to ‘first establish that it will win the fray’ in order to gain certification under Rule 23(b)(3).” Rather, it was sufficient that the district court determined the plaintiffs’ expert’s pooled regression model “was capable of showing that the DPP class members suffered antitrust impact on a class-wide basis, notwithstanding [the defense expert’s] critique.” The court reasoned that, while “[r]easonable minds may differ” as to whether plaintiffs’ expert’s evidence “is probative,” “that is a question of persuasiveness for the jury once the evidence is sufficient to satisfy Rule 23.”
On the question of how Article III standing doctrine applies to the predominance inquiry at class certification, the court held that it did not need to reach the issue because the plaintiffs made the requisite showing that all class members had standing. However, it held, with respect to the presence of uninjured class members generally, that “courts must apply Rule 23(b)(3) on a case-by-case basis, rather than rely on a per se rule that a class cannot be certified if it includes more than a de minimis number of uninjured class members.” The court acknowledged, however, that the Supreme Court’s recent decision in TransUnion v. Ramirez expressly left open the question whether every class member must demonstrate Article III standing before a court certifies a class.
Judge Lee dissented from the en banc court’s opinion, joined by Judge Kleinfeld. The two dissenting judges believed the district court’s Rule 23 gatekeeper role required it to resolve the the uninjured class member question and deny certification if the number of uninjured class members is more than de minimis.
AAI’s amicus program is a key component of fulfilling AAI’s mission of promoting competition that protects consumers, businesses, and society. Comments on AAI amicus briefs or suggestions for AAI amicus participation should be directed to Randy Stutz, rstutz@antitrustinstitute.org, (202) 905-5420.
