Disk-Drive Buyers Seek Class Cert on Price Fixing

SAN FRANCISCO (CN) - Disk-drive buyers asked a federal judge on Wednesday to certify a class of indirect purchasers in an ongoing antitrust suit against dozens of major tech companies.

The multidistrict litigation in San Francisco stemmed in part from a 2010 class action filed by computer makers Acer and Gateway claiming the companies conspired to "fix, raise, stabilize and maintain prices" for the multibillion-dollar optical-disc drive industry.

U.S. District Judge Richard Seeborg previously denied the plaintiffs' motion for class certification in October 2014, finding their analysis of disk-drive purchase data was insufficient to show classwide impact.

During a hearing Wednesday, defense attorney Jeffrey Kessler argued the plaintiffs' new study of approximately 445 million disk-drive transactions still falls short of that standard.

"Before, they assumed classwide impact instead of demonstrating it," Kessler said. "They have a nice new package, but it doesn't fix these errors."

The new data analysis, performed by University of Texas economist Dr. Kenneth Flamm, measures the impact of the defendants' alleged price-fixing scheme on the market based on "the most sound methods of economic and statistical analysis," said class attorney Jeff Friedman.

"We spent over 200 hours of economists' time painstakingly putting together a huge mess of data, using almost every scrap of usable data they produced," Friedman said. "Now we have data from 87 percent of sales in the market from firms that are responsible."

Friedman said the analysis clearly measures the impact of the defendants' "conspiratorial intervention" in the marketplace and that the plaintiffs' hypothesis was backed up by a Granger causality test, a statistical method developed by Nobel Prize-winning economist Clive Granger.

"The Granger causality analysis allows us to measure the overcharge," Friedman said. "The larger your sample size, the more precise and accurate your results, and the closer you will get to the true value."

Kessler responded that the Granger causality test cannot be used as "magic bullet" to fix all the "gaping holes" in the plaintiffs' evidence that purports to show all the proposed class members were injured by the defendants' actions.

"It's not a matter of identifying the gaps," Seeborg said. "Do they have an argument that covers the gaps?"

Kessler argued the plaintiffs fundamentally failed to demonstrate classwide impact, starting with the fact that their data analysis lumps together different types of buyers including wholesalers, distributers, retailers and individual consumers.

"The extension of your argument is, assuming there is a vast conspiracy here, plaintiffs are never going to be able to put together an analysis that will suffice for class purposes," Seeborg said. "You can pick apart everything they present."

Kessler replied that the plaintiffs' burden to show classwide impact is not an impossible one, but meaningful differences between the various buyer groups should be considered.

"If they had an overcharge regression analysis that did not just assume impact overall and didn't have these gaps and no statistical impact, then they wouldn't have to do Granger, but Granger doesn't remove the fact that they had no methodology in the first place," Kessler said.

The defense attorney argued the plaintiffs only adjusted for cost when performing the Granger test and failed to take into account 300 other variables, including supply and demand.

Seeeborg summarized his understanding of both sides' arguments. He said the plaintiffs maintain the Granger test backs up the validity of their study's conclusions while the defendants argue their initial approach is flawed and that the Granger test adds no value to their claims of classwide impact.

"We have other evidence here of conspiratorial conduct," Seeborg said. "Why can't I consider that in that context?"

The existence of an alleged conspiracy is not the issue, Kessler argued, adding the judge should instead focus his ruling on whether or not the plaintiffs have sufficiently demonstrated impact to all class members.

Three of the defendants - Hitachi-LG, NEC Corp. and Panasonic - previously settled class action claims by direct-purchaser plaintiffs for $37.9 million.

In July, Seeborg awarded $13 million in attorneys' fees to lawyers representing those direct-purchaser plaintiffs.

A long list of plaintiffs, including Hewlett-Packard, sued the defendants starting in 2010, claiming the price-rigging scheme allowed them to control 90 percent of the disk-drive market and rake in more than $45 billion in revenue between 2004 and 2008, according to HP.

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