In re Industrial Silicon Antitrust Litigation

A group of plaintiffs filed an antitrust suit against a group of defendant suppliers, alleging an illegal conspiracy to fix ferrosilicon prices. Ferrosilicon is a necessary component in the production of carbon steel. At issue in this case was the propriety of the testimony from the plaintiff’s expert, Dr. Laurits Christensen. Dr. Christensen was prepared to testify on damages, and the defendants objected to Dr. Christensen’s testimony as not sufficiently reliable to withstand the Daubert standard. Dr. Christensen’s credentials were not argued—he had a Ph.D. in economics, had taught economics at the collegiate level for 20 years, and was a member of the Board of Editors of the American Economic Review. At issue was Dr. Christensen’s use of a multiple-regression analysis to try to establish the plaintiffs’ damages. A multiple-regression analysis is often used in statistics to establish the presence or absence of an impact that multiple explanatory independent variables can have upon a single dependent variable. In Dr. Christensen’s study, he used the price charged by defendants for ferrosilicon as the dependent variable. Dr. Christensen included independent explanatory variables for several factors, including iron and steel production, gross domestic product, the import price index of ferrosilicon, the price of electricity, and capacity utilization in iron and steel industries. Dr. Christensen’s studies found a strong relationship between import prices and domestic prices of ferrosilicon but no real contribution of the remaining variables toward explaining domestic prices. Dr. Christensen then used movements in the import prices to predict what the defendants’ prices would have been but for their price-fixing agreement. The statistical significance of this relationship existed at a greater than 95 percent confidence level. The defendants argued that Dr. Christensen’s methodology was flawed because he failed to include additional independent explanatory variables. Interestingly, Dr. Christensen responded to this criticism by including additional factors suggested by the defendants’ expert, which increased the damages he estimated. Defendants were also critical that Dr. Christensen’s model did not provide a single predicted price that the jury could use to find a difference in actual prices and prices but for the conspiracy. Defendants moved to exclude Dr. Christensen’s testimony.