Expert Testimony Was Necessary To Establish The Relevant Market For Antitrust Analysis

In an auto racing antitrust action, the Sixth Circuit affirms summary judgment for the defendant racing association after trial court strikes as unreliable the plaintiff’s experts’ testimony on the relevant markets, noting a circuit split on the need for expert economic testimony to show a relevant market; the Sixth Circuit finds lay testimony was insufficient to establish a reliable economic foundation to determine the affected market for purposes of Sherman Act antitrust analysis, in Kentucky Speedway, LLC v. National Ass'n of Stock Car Auto Racing, Inc., 588 F.3d 908 (6th Cir. Dec. 11, 2009) (No. 08-5041)

A necessary step in proof of an antitrust violation is evidence that a market has been affected. See, e.g., Lantec Inc. v. Novell, Inc., 306 F.3d 1003, 1024 (10th Cir. 2002) (“In order to prevail on all their antitrust claims,” plaintiffs “must establish the relevant market.”). However, the courts are divided on whether expert testimony is necessary to prove this element, rather than lay testimony. Compare Bailey v. Allgas, Inc., 284 F. 3d 1237, 1247 (11th Cir. 2002) (“Gunther, however, was presented as an expert in economics, not an expert in the liquid propane gas industry. The sole extent of his research on the industry itself consisted of visiting the website of a national liquid propane gas association and placing two brief telephone calls to unknown persons at the association. At no point did Gunther conduct a survey of the homes in the geographic market, or otherwise research the area, to determine the percentage of houses already fitted for alternative heating sources. Gunther also failed to calculate the actual cost of retrofitting the houses in order to determine the cross-elasticity of demand between propane gas and other fuel sources. In light of these deficiencies, we conclude Gunther's evidence is insufficient to establish the relevant product market.”); Am. Key Corp. v. Cole Nat'l Corp., 762 F.2d 1569, 1579 (11th Cir. 1985) (“Construction of a relevant economic market or a showing of monopoly power in that market cannot ... be based upon lay opinion testimony.”) and Drs. Steven & Latham, P.A. v. Nat'1 Med. Enter., 672 F. Supp. 1489, 1512 n.25 (D.S.C. 1987), aff'd, 846 F.2d 70 (4th Cir. 1988) (“Failure to adduce expert testimony on … market definition argues strongly in favor of granting summary judgment against an antitrust plaintiff”), with Anti-Monopoly, Inc. v. Hasbro, Inc., 958 F. Supp. 895, 904 (S.D.N.Y.) (“experts are not always essential to defining the relevant market”), aff'd, 130 F.3d 1101 (2d Cir. 1997), cert. denied, 525 U.S. 813 (1998).

In a recent case, the Sixth Circuit considered the issue whether expert testimony was necessary to establish a relevant market. In the case, defendant NASCAR’s business to “sanctioned” auto races, meaning that they organized and staged races by selecting the location, the drivers and the rules involved in highly publicized racing events. The defendant’s sanctioned races became “highly coveted … due to the consistently high quality and profitability” of NASCAR events. Plaintiff Kentucky Speedway had constructed a track in the hope of hosting races, including those of NASCAR. Despite the “rave reviews” the Kentucky track received as a racing location, NASCAR declined to sanction any races at the plaintiff’s Kentucky facility. The plaintiff alleged the decision not to sanction the racetrack deprived it “of the most profitable and high-profile racing series business.” The plaintiff attributed NASCAR’s racing location decisions to anticompetitive conduct by the defendants.

After alleging unlawful monopolization and illegal conspiracy in restraint of trade, under the Sherman Act, the defendants filed a motion for summary judgment, which the trial court granted. The district court concluded that the plaintiff presented insufficient evidence to identify the markets NASCAR allegedly monopolized. This failure was based on the presentation of witnesses who could not qualify as experts on the issue of market identification. Absent the ability to show the affected market, the plaintiff was unable to show the defendant’s conduct had a cognizable antitrust impact on that relevant market. In general for antitrust cases, a market can be determined by testing the “reasonable interchangeability” of goods or services. This issue concerns whether the product or service at issue had substitutes that could perform the same function of the plaintiff’s goods or services. In addition, how sensitive consumers were to price before they began to choose substitutes for the defendant’s product or service (e.g., elasticity) could also help define the relevant market.

The trial judge excluded the plaintiff’s experts as unreliable under FRE 702 and Daubert. The plaintiff’s expert provided evidence of possible substitutes, such as other racing series, stock-car and open-wheel racing, and other professional sports leagues. However, the plaintiff’s expert failed to consider a wide range of other possible substitutes for NASCAR races. The witness’s consideration of only minor car races as substitutes unduly limited the scope of possible substitutes. In addition, the witness assessed whether there was a “Small but Significant Non-Transitory Increase in Price” (SSNIP), which is used in antitrust cases as a diagnostic tool. Instead, the expert used his own unique technique which had not been tested and had not received peer review and publication. The plaintiff failed to show that the technique the first expert used to make his calculations satisfied Daubert and FRE 702 standards. Kentucky Speedway, 588 F.3d at 918.

The trial judge also struck the plaintiff’s second expert on the issue of the relevant market definition. This expert’s opinion on market effects was inadmissible under FRE 702 because it was based on the analysis made by the first expert witness (whose “Small but Significant Non-transitory Increase in Price” calculations had been excluded as untested, not peer reviewed or published). Because this expert admitted that his analysis was based on the first expert’s definition of the market, he had “conducted no interchangeability analysis of his own,” and his opinions were also excluded. Kentucky Speedway, 588 F.3d at 919.

Since the plaintiff’s experts were stricken, the plaintiff changed tact and relied on other non-expert evidence in the case. The Sixth Circuit noted that the issue “whether expert testimony is necessary to establish a relevant market” presented a matter of first impression in the circuit:

“This court has not yet weighed in on the issue. Suffice it to say, however, that what [plaintiff] KYS proposes to use in place of expert testimony-namely lay testimony and internal [defendant] NASCAR marketing documents-does not provide a sound economic basis for assessing the market for Sprint Cup races the way that a proper interchangeability test would. In short, without [the first excluded expert] Zimbalist's testimony [on product or service interchangeability], KYS lacks the ability to define the relevant markets necessary to succeed on its claims.
Kentucky Speedway, 588 F.3d at 919 (citing Verizon Commc'ns, Inc. v. Law Offices of Curtis Trinko, LLP, 540 U.S. 398, 407 (2004) (a claim under Section 2 of the Sherman Act requires “the possession of monopoly power in the relevant market”) (emphasis added); Worldwide Basketball & Sport Tours, Inc. v. NCAA, 388 F.3d 955, 959 (6th Cir. 2004) (listing the requisite elements for a claim under Section 1 of the Sherman Act, the second being unreasonable restraint of trade “in the relevant market ”) (emphasis added); NHL Players' Assoc. v. Plymouth Whalers Hockey Club, 325 F.3d 712, 719-20 (6th Cir. 2003) (“Failure to identify a relevant market is a proper ground for dismissing a Sherman Act claim.”)).

In the absence of expert testimony, the circuit concluded that the plaintiff failed to carry its burden to show the relevant market for antitrust analysis. While the case does not specifically endorse the view that expert testimony is always necessary in an antitrust case regarding market definition, it strongly suggests that the calculations necessary to show a market had been affected by the monopolistic actions of a defendant would normally not be possible without assessment by one with expertise in the field.


Federal Rules of Evidence