We have worked on large-scale, competition law infringement related, damage litigation cases for over a decade in Finland and elsewhere. Also this winter, we have had our hands full with these cases in different EU jurisdictions. We are economists focusing on the economic analyses about alleged price overcharges, pass-on of overcharges and the subsequent damages. It is interesting how the cases resemble each other not depending on, for example, the industry at question. As a word of caution for anyone involved in the economic assessment of alleged cartel damages, keep in mind at least the following:
- The data used - Do not fabricate data or use unrelated data. This may seem obvious, but surprisingly it is not. We have seen cases in which either the experts of the plaintiffs or the defendants base their analyses on for example market level indirect data or aggregate their data to be in direct contrast to the operations of the market at question. If you have access to the first hand product level data, use it!
- Industry expertise - As economists, we are most certainly not the best people to determine what affects prices, how the demand is affected, what are the most important cost factors in production etc. Yet, all this information is absolutely necessary while developing the model to be used in the construction of the but-for prices. Do not attempt to develop your econometric model as a "desk-top" exercise, it will fail. Use the industry experts of typically your client.
- But-for analyses - Make sure that you really understand what you are doing. The purpose is to determine the causal relationship between the operations of the cartel and the development of prices. Not to forecast something, not to analyse if some individual control variable is statistically significant etc.
- The model - First check point 2 above. Then forget the idea that you and only you have created THE model that is without questions the best and only reliable alternative to construct the but-for prices. Usually, it is not.
- Communication of the results - Separate the important from the not so important. You may be interested in some econometric details, some specific occurrence in the markets or for example in some nifty demonstration about the mistakes you believe to exist in the other parties analyses. There is a good chance others are not. We have not seen any case where the outcome of the case didn't depend (from the perspective of economics) from one or two real issues (data validity, cartel period definition, clear modelling mistakes) in stead of hundreds of details of the analyses. Identify these!