ANTITRUST AND

COMPETITION

CORNERSTONE RESEARCHECONOMIC AND FINANCIAL CONSULTING AND EXPERT TESTIMONY

High Fructose Corn Syrup Antitrust Litigation • Somers v. Apple Inc. • Google–ITA Software Acquisition • Leegin Creative Leather

Products Inc. v. PSKS Inc. • Commerce Commission v. Cards New Zealand • Anzai v. Chevron Corp. • Wyoming Tight Sands Natural

Gas Price Litigation • Collins v. International Dairy Queen Inc. • Online DVD Rental Antitrust Litigation • Aguilar v. Atlantic Richfield

Corp. • InBev–Anheuser-Busch Acquisition • Cigarette Antitrust Litigation • Food Lion v. Dean Foods Company • Microsoft Antitrust

Litigation • Compensation of Managerial, Professional and Technical Employees Antitrust Litigation • Union Pacific–Southern Pacific

Railroad Merger • Spirit Airlines Inc. v. Northwest Airlines Inc. • Jensen Enterprises Inc. v. Oldcastle Precast Inc. • Southeastern Milk

Antitrust Litigation • Hilton v. Children’s Hospital San Diego • Glaxo–Burroughs Wellcome Merger • FERC Refund Hearings on

California Electricity Markets • NASDAQ Antitrust Litigation • S&M Farm Supply Inc. v. Pharmacia Corp. • Comcast–NBC Universal

Joint Venture • International Air Transportation Surcharge Antitrust Litigation • Allen, d/b/a Al-lens Farm v. Dairy Farmers of America

Inc. • Polyester Staple Antitrust Litigation • Exxon–Mobil Merger • Flash Memory Antitrust Litigation • Cingular–AT&T Wireless

Merger • Ovcon Antitrust Litigation • United States v. Appleton Papers Inc. • Morris & Dickson Co. LLC v. Abbott Laboratories • MCI

WorldCom–Sprint Merger • EPDM Antitrust Litigation • Sorbates Direct Purchase Antitrust Litigation • Seagate Technology–Conner

Peripherals Merger • Thales Avionics Inc. v. Matsushita Avionics Systems Corp. • California Wholesale Electricity Antitrust Litigation

VISA Check/MasterMoney Antitrust Litigation • EchoStar–DirecTV Merger • Sweetwater Valley Farm Inc. v. Dean Foods Company • Sun

Microsystems Inc. v. Microsoft Corp. • Intel–McAfee Merger • Verdin v. R&B Falcon Drilling U.S.A. Inc. • Western States Wholesale

Natural Gas Antitrust Litigation • Vitamins Antitrust Litigation • Packard Bell–Subsidiaries of NEC and Groupe Bull Merger • Stock

Exchange Options Trading Antitrust Litigation • Google–AdMob Merger • Payment Card Interchange Fee and Merchant Discount

Antitrust Litigation • SRAM Antitrust Litigation • Freeman v. San Diego Association of Realtors • Chemical Products Technologies v.

Monsanto Co. • Bourns Inc. v. Raychem Corp. • People of California v. Chevron Corp. • Mozart Co. v. Mercedes-Benz of North America

Inc. • E.I. du Pont de Nemours and Co. v. Monsanto Co. • CoStar Group–LoopNet Merger • American Express Travel Related Services

Co. Inc. v. Visa USA Inc. • US Robotics–Hayes Microcomputer Products Merger • Mission Resources Inc. II v. Texaco Inc. • Spartanburg

Regional Healthcare System v. Hillenbrand Industries Inc. • ENCAD Inc. v. Hewlett-Packard Co. • Rambus Inc. v. Micron Technology Inc.

Cornerstone Research provides economic and financial consulting and expert testimony in all phases of complex litigation and regulatory proceedings. The firm works with an extensive network of prominent faculty and industry practitioners to identify the best-qualified expert for each assignment. Cornerstone Research has earned a reputation for consistent high quality and effectiveness by delivering rigorous, state-of-the-art analysis for over 25 years. The firm has 600 staff and offices in Boston, Chicago, London, Los Angeles, New York, San Francisco, Silicon Valley, and Washington.

www.cornerstone.com

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Cornerstone Research staff and affiliated experts provide economic analysis and expert testimony in antitrust litigation and regulatory matters.

Our experience spans a broad spectrum of antitrust issues that arise in price fixing and other horizontal conduct, monopolization and exclusion-

ary practices, and merger and acquisition matters, as well as antitrust issues associated with regulated industries and with intellectual property.

We have worked on many class actions in which we have addressed issues of class certification, liability, and damages.

Our antitrust cases have involved many industries, including agriculture, consumer products, energy, financial institutions, information

technology, manufacturing, pharmaceuticals and healthcare, real estate, telecommunications, and transportation.

SELECTED EXPERTS AND MAJOR CASES AT A GLANCE

ANTITRUST AND COMPETITION

John Asker, UCLA Merger Involving Bid for Rival

Timothy F. Bresnahan, Stanford UniversityCommerce Commission v. Cards New Zealand et al.Google–ITA Software AcquisitionIntel–McAfee Merger

Kenneth G. Elzinga, University of VirginiaCigarette Antitrust LitigationHigh Fructose Corn Syrup Antitrust LitigationLeegin Creative Leather Products Inc. v. PSKS Inc.

Henry G. Grabowski, Duke University Ovcon Antitrust Litigation

Christopher M. James, University of FloridaEPDM Antitrust Litigation High Fructose Corn Syrup Antitrust LitigationPayment Card Interchange Fee and Merchant Discount Antitrust Litigation

Michael C. Keeley, Cornerstone ResearchAguilar et al. v. Atlantic Richfield Corporation et al. Flash Memory Antitrust LitigationPeople of the State of California et al. v. Chevron Corporation et al.

Allan W. Kleidon, Cornerstone ResearchNASDAQ Antitrust LitigationStock Exchange Options Trading Antitrust Litigation

Aviv Nevo, University of PennsylvaniaMultiple High-Profile MergersAntitrust Matter in Exchange Platform Industry

Peter C. Reiss, Stanford UniversityInternational Air Transportation Surcharge Antitrust LitigationTobacco Master Settlement Agreement Arbitration

Gregory L. Rosston, Stanford UniversityComcast–NBC Universal Joint VentureJensen Enterprises Inc. v. Oldcastle Precast Inc. et al.

James L. Sweeney, Stanford University Wyoming Tight Sands Natural Gas Price Litigation

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PRICE FIXING AND OTHER HORIZONTAL CONDUCT

Cornerstone Research has worked on cases involving allegations of price fixing, agreements to allocate territories or customers,

group boycotts, and other types of allegedly anticompetitive horizontal conduct in a variety of industries. Economic analysis of

allegedly collusive conduct among competitors typically requires assessing the economic incentives of each firm alleged to be a

participant, deriving a set of testable hypotheses tailored to the specific conduct allegations that distinguish collusive from com-

petitive behavior, and analyzing data and case facts to test the hypotheses. Economic assessment typically requires estimating

prices that would have prevailed absent the challenged conduct. We recognize the importance of evaluating these issues through

empirical research within a framework of sound economic concepts.

SELECTED CORNERSTONE RESEARCH CASE EXPERIENCE

Aguilar et al. v. Atlantic Richfield Corporation et al.

Allen, d/b/a Al-lens Farm et al. v. Dairy Farmers of America Inc. et al.

Anzai v. Chevron Corporation et al.

Arleen Freeman et al. v. San Diego Association of Realtors et al.

Cigarette Antitrust Litigation

Commerce Commission v. Cards New Zealand et al.

Compensation of Managerial, Professional and Technical Employees Antitrust Litigation

EPDM Antitrust Litigation

FERC Refund Hearings on California Electricity Markets

Flash Memory Antitrust Litigation

Food Lion LLC et al. v. Dean Foods Company et al.

High Fructose Corn Syrup Antitrust Litigation

International Air Transportation Surcharge Antitrust Litigation

NASDAQ Antitrust Litigation

Online DVD Rental Antitrust Litigation

Payment Card Interchange Fee and Merchant Discount Antitrust Litigation

People of the State of California et al. v. Chevron Corporation et al.

Polyester Staple Antitrust Litigation

S&M Farm Supply Inc. v. Pharmacia Corporation and Monsanto Company

Saskia V. W. Hilton v. Children’s Hospital San Diego et al.

Sorbates Direct Purchase Antitrust Litigation

Southeastern Milk Antitrust Litigation

SRAM Antitrust Litigation

Stock Exchange Options Trading Antitrust Litigation

Sweetwater Valley Farm Inc. et al. v. Dean Foods Company et al.

United States of America v. Appleton Papers Inc.

Verdin v. R&B Falcon Drilling U.S.A. Inc. et al.

VISA Check/MasterMoney Antitrust Litigation

Vitamins Antitrust Litigation

Western States Wholesale Natural Gas Antitrust Litigation

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MONOPOLIZATION AND EXCLUSIONARY PRACTICES

Cornerstone Research has analyzed monopolization claims, tying and exclusive dealing allegations, and pricing practices alleged to

limit competition, such as loyalty discounts and bundled rebates. Determining whether such practices are anticompetitive requires

understanding when they can be attributed to competition among firms, are the result of “hard bargaining” between buyers and

sellers, or have efficiencies that outweigh any potential harm to competition.

SELECTED CORNERSTONE RESEARCH CASE EXPERIENCE

American Express Travel Related Services Company Inc. v. Visa USA Inc. et al.

Bourns Inc. v. Raychem Corporation

California Wholesale Electricity Antitrust Litigation

Chemical Products Technologies LLC v. Monsanto Company

Collins v. International Dairy Queen Inc. and American Dairy Queen Corporation

E.I. du Pont de Nemours and Company v. Monsanto Company

ENCAD Inc. v. Hewlett-Packard Company

Jensen Enterprises Inc. v. Oldcastle Precast Inc. et al.

Leegin Creative Leather Products Inc. v. PSKS Inc.

Microsoft Antitrust Litigation

Mission Resources Inc. II v. Texaco Inc. et al.

Morris & Dickson Co. LLC v. Abbott Laboratories

Mozart Co. v. Mercedes-Benz of North America Inc.

Ovcon Antitrust Litigation

Rambus Inc. v. Micron Technology Inc. et al.

Spartanburg Regional Healthcare System v. Hillenbrand Industries Inc. et al.

Spirit Airlines Inc. v. Northwest Airlines Inc.

Stacie Somers v. Apple Inc.

Sun Microsystems Inc. v. Microsoft Corporation

Thales Avionics Inc. v. Matsushita Avionics Systems Corporation

Wyoming Tight Sands Natural Gas Price Litigation

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MERGERS AND ACQUISITIONS

In conjunction with both government investigations and private litigation, Cornerstone Research has analyzed the potential effects

of mergers, joint ventures, and collaborations among competitors. Such analyses typically require applying economic theory and

empirical techniques to define relevant markets, determine competitive interactions, analyze the potential impact on prices and the

potential for foreclosure, and assess whether there are efficiencies associated with the collaboration. Together with our experts, we

have provided testimony before U.S. and European competition authorities in all stages of the merger review process.

SELECTED CORNERSTONE RESEARCH CASE EXPERIENCE

Cingular–AT&T Wireless Merger

Comcast–NBC Universal Joint Venture

CoStar Group–LoopNet Merger

EchoStar–DirecTV Merger

Exxon–Mobil Merger

Glaxo–Burroughs Wellcome Merger

Google–AdMob Merger

Google–ITA Software Acquisition

InBev–Anheuser-Busch Acquisition

Intel–McAfee Merger

MCI WorldCom–Sprint Merger

Packard Bell–Subsidiaries of NEC and Groupe Bull Merger

Seagate Technology–Conner Peripherals Merger

Union Pacific–Southern Pacific Railroad Merger

US Robotics–Hayes Microcomputer Products Merger

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CLASS CERTIFICATION

Cornerstone Research has worked on a variety of direct purchaser and indirect purchaser antitrust class actions. Class certification

inquiries typically focus on two economic issues. First, would the alleged wrongful conduct have affected every proposed class

member (i.e., is there “common impact”)? Second, to the extent that common impact can be shown, could the amount of each class

member’s damages be proven using common evidence? We have addressed these issues in many class actions using appropriate

analytical methods.

SELECTED CORNERSTONE RESEARCH CASE EXPERIENCE

Allen, d/b/a Al-lens Farm et al. v. Dairy Farmers of America Inc. et al.

Cigarette Antitrust Litigation

Compensation of Managerial, Professional and Technical Employees Antitrust Litigation

Flash Memory Antitrust Litigation

Food Lion LLC et al. v. Dean Foods Company et al.

Polyester Staple Antitrust Litigation

S&M Farm Supply Inc. v. Pharmacia Corporation and Monsanto Company

Sorbates Direct Purchase Antitrust Litigation

Stacie Somers v. Apple Inc.

Sweetwater Valley Farm Inc. et al. v. Dean Foods Company et al.

Verdin v. R&B Falcon Drilling, U.S.A. Inc. et al.

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John Asker UCLA

Visiting ScholarVisiting Scholar

Federal Trade CommissionFederal Reserve Bank, New York

Timothy F. Bresnahan Stanford University

Deputy Assistant Attorney General and Chief Economist, Antitrust Division U.S. Department of Justice

Jeremy I. Bulow Stanford University Director, Bureau of Economics Federal Trade Commission

Martin E. Cave Imperial College London

Special Advisor, European Commissioner; Member UK Competition Commission

Gregory S. Crawford University of Warwick Chief Economist Federal Communications Commission

Kenneth G. Elzinga University of Virginia

Special Economic Advisor to the Assistant Attorney General U.S. Department of Justice

Christopher M. James University of Florida

Visiting ScholarConsultantSenior Economic Advisor

Federal Reserve Bank, San FranciscoFederal Deposit Insurance CorporationComptroller of the Currency, Department of Treasury

Michael C. Keeley Cornerstone Research Research Officer Federal Reserve Bank, San Francisco

Edward P. Lazear Stanford University Chairman President’s Council of Economic Advisers

Aviv Nevo University of Pennsylvania

Deputy Assistant Attorney General and Chief Economist, Antitrust Division U.S. Department of Justice

Michael H. Riordan Columbia University Chief Economist Federal Communications Commission

William P. Rogerson Northwestern University Chief Economist Federal Communications Commission

Gregory L. Rosston Stanford University

Senior Economist for TransactionsDeputy Chief Economist

Federal Communications CommissionFederal Communications Commission

SELECTED EXPERTS WITH GOVERNMENT EXPERIENCE

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MATCHING EXPERTISE WITH CASE REQUIREMENTS

Cornerstone Research and our affiliated experts have expertise in economics, finance, marketing, and accounting that we bring

to our antitrust and competition cases. The breadth of our capabilities and experience allows us to apply the specific analytic

approaches and expert testimony needed for each case.

ACCOUNTING

We have addressed accounting

issues in many different antitrust

proceedings. For example, we

have used our accounting

capabilities and experience to

allocate cost in the application

of tests for predatory pricing,

bundling, and price discrimination,

and to assess claims of lost profits

under state competition laws.

MARKETING

We have analyzed how marketing

practices affect competition in

many different industry settings.

For example, we have examined

how specific pharmaceutical

marketing practices modify the

way increased competition

affects drug prices. We have also

conducted consumer surveys to

address market definition and

competitive effects issues in

online advertising markets.

FINANCE

Antitrust issues often arise in

financial markets. From the

NASDAQ Market-Makers Antitrust

Litigation to payment system

matters to assessing allegations

of price fixing in derivatives

markets, we apply our experience

in finance and our knowledge of

financial institutions and instru-

ments to assess the competitive

impact of conduct questioned

by regulators or plaintiffs.

ECONOMICS

Our analyses of complex

antitrust and competition issues

are grounded in empirical and

applied economics. We have

analyzed the competitive effects

of mergers and joint ventures,

alleged horizontal conduct such

as price fixing and market

allocation, and claims of

attempted monopolization.

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Leegin Creative Leather Products Inc. v. PSKS Inc.Expert: Kenneth G. Elzinga, University of Virginia Law Firm: Fenwick & West

The plaintiffs sued Leegin, a manufacturer of leather products, under Section 1 of the Sherman Act, claiming Leegin’s suggested retail price policy was per se illegal. Counsel for Leegin retained Cornerstone Research and Professor Kenneth Elzinga of the University of Virginia to address whether Leegin’s resale price maintenance (RPM) policy was pro- or anticompetitive.

In his report, Professor Elzinga explained the current view among economists that RPM encourages competition and can enhance consumer welfare by providing incentives for retailers to offer more and better services. He found that Leegin’s suggested retail pricing policy enhanced competi-tion in the markets for women’s fashion accessories. Relying on the per se rule, both the district court and the intermediate appellate court found Dr. Elzinga’s analysis irrelevant because the law did not consider whether the practice was pro- or anticompetitive. However, in a 5-4 decision, the U.S. Supreme Court went against the lower courts, and overruled Dr. Miles Medical, a 96-year-old antitrust precedent that prohibited manufactur-ers from maintaining retail prices for their products. The Court’s majority opinion used the same economic reasoning outlined by Professor Elzinga to determine that RPM arrangements should be considered under a rule of reason. The Court remanded the case to the lower court for proceedings consistent with a rule-of-reason treatment, and the case was eventually thrown out. On August 17, 2010, the Fifth Circuit affirmed the lower court’s dismissal of the Leegin case.

In re Flash Memory Antitrust LitigationExpert: Michael C. Keeley, Cornerstone Research Law Firms: Latham & Watkins; McDermott Will & Emery; Bingham McCutchen; Quinn Emanuel Urquhart & Sullivan; and O’Melveny & Myers

Counsel for the defendants retained Dr. Michael Keeley, a senior vice president of Cornerstone Research, to analyze whether common evidence could be used to prove impact and damages in these putative class action price-fixing cases. The plaintiffs alleged that the defendants—Samsung, Toshiba, SanDisk, Renesas Electronics, Hynix, and Hitachi—conspired to sell NAND flash memory to direct purchasers at artificially inflated prices and that overcharges in turn were passed through to indirect purchasers.

Dr. Keeley submitted testimony in the direct and indirect purchaser cases, opining that common evidence could not be used to demonstrate that all direct purchasers of NAND flash memory would have paid artificially inflated prices had there been a price-fixing agreement. Among other things, they purchased distinct types of NAND flash memory, many of which were not substitutes for one another, and paid widely varying prices resulting from individual negotiations.

The court denied the motion for class certification in the indirect purchaser case. In its ruling, the court cited Dr. Keeley extensively and concluded that “Plaintiffs have not shown, to the Court’s satisfaction, that common evidence can be presented to establish the requisite antitrust impact on direct purchasers or indirect purchasers.” In the direct purchaser action, the court denied a request by the plaintiffs’ counsel to substitute a new class representative and asked them to show why the case should not be dismissed because the class representative did not purchase NAND flash memory directly from any defendant. Subsequently, the plaintiffs agreed to voluntarily dismiss the case, and the parties filed a stipulation dismissing the direct purchaser action with prejudice in exchange for a waiver of costs.

The U.S. Court of Appeals for the Ninth Circuit subsequently denied an appeal of the district court’s decision.

SELECTED CORNERSTONE RESEARCH ANTITRUST AND COMPETITION CASES

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SELECTED CORNERSTONE RESEARCH ANTITRUST AND COMPETITION CASES

Commerce Commission v. Cards New Zealand et al.Expert: Timothy F. Bresnahan, Stanford University Law Firms: Russell McVeagh; Bell Gully; and Minter Ellison Rudd Watts

The four largest New Zealand banks retained Cornerstone Research and Professor Timothy Bresnahan of Stanford University to assess, from an economic standpoint, a claim by New Zealand’s Commerce Commission that the banks’ standard agreements with each of Visa and with MasterCard (which enable the banks to participate in the Visa and MasterCard schemes) included provisions on interchange fees that constituted a fixing of the price for credit card transactions charged to merchants. The interchange fee on a credit card transaction is paid by the bank that provides credit card services to merchants; it is a cost to that bank and is passed through to its merchant customers. The interchange fee is paid to the bank that issued the card to the cardholder. The Commerce Commission also claimed that other Visa and MasterCard rules applied to merchants—in particular to honor all cards and no surcharge rules—also harmed competition in markets for credit card services supplied to merchants. The allegations in this case were similar to those made in the class action case challenging the interchange fee and other rules brought by merchants in the United States.

Professor Bresnahan provided analysis for the banks on the economic effect of interchange fees on the incentives faced by card-issuing banks and on the total volume of credit card transactions. The case settled on the eve of trial under terms that required greater transparency in interchange fees, modified the implementation of the rules restraining surcharging, and provided for other terms that remain confidential.

In re International Air Transportation Surcharge Antitrust LitigationExpert: Peter C. Reiss, Stanford University Law Firm: Simpson Thacher & Bartlett

In 2006, multiple class actions were filed in the United States against Virgin Atlantic Airways (VAA) and British Airways (BA). The plaintiffs alleged that collusion between VAA and BA on fuel surcharges led to inflated airfares. A class of U.S. ticket purchasers and a class of UK ticket purchasers were proposed.

Defense counsel retained Cornerstone Research to provide analytic support for VAA in its submissions to the competition authorities in both countries and to support the expert testimony of Professor Peter Reiss of Stanford University on damages in the civil action. Professor Reiss explained that economic theory showed that colluding on only one component of the fare could not lead to a sustained increase in prices. Competition on the base fare would have led to a total ticket price (base fare plus surcharge) no higher than the normal, noncollusive fare. Professor Reiss and Cornerstone Research’s economet-ric analysis of margins and changes in fares using VAA’s ticket database and cost data showed that there were no damages from the communication on fuel surcharges. Following mediation, a settlement agreement in the civil case was reached in 2008 and granted final approval in April 2009.

Comcast–NBC Universal Joint Venture Experts: Gregory L. Rosston, Stanford University, and Michael D. Topper, Cornerstone Research Law Firms: Willkie Farr & Gallagher and Davis Polk & Wardwell

Comcast Corporation and its outside counsel retained Cornerstone Research to work on regulatory and competition issues related to the $30 billion joint venture between Comcast and NBC Universal (NBCU).

Cornerstone Research provided economic analysis during the regulatory review process at the Federal Communications Commission (FCC) and the Department of Justice (DOJ), which focused on the competitive implications of the combination of NBCU’s content with Comcast’s distribu-tion platforms. We worked with two economic experts, Professor Gregory Rosston of Stanford University and Dr. Michael Topper, a vice president of Cornerstone Research, who submitted reports to the reviewing agencies. Professor Rosston and Dr. Topper analyzed the implications of the transaction for competition in national and local advertising markets; analyzed the likely procompetitive effects of the transaction on the quantity, quality, and convenience of video viewing by consumers; and responded to theories of competitive harm. Cornerstone Research also contributed to several other submissions to and meetings with the FCC and DOJ, and worked with counsel for Comcast and NBCU to respond to economic issues advanced by par-ties opposing the transaction or seeking the imposition of conditions. After an extensive review process, the FCC and DOJ approved the joint venture with certain conditions.

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In re Ovcon Antitrust LitigationExpert: Henry G. Grabowski, Duke University Law Firm: Simpson Thacher & Bartlett

Counsel for codefendant Warner Chilcott retained Cornerstone Research and Professor Henry Grabowski of Duke University to determine if an exclusive supply agreement between Warner Chilcott and Barr Pharmaceuticals had any anticompetitive effects. The Federal Trade Commission; thirty-four states’ attorneys general; and classes of consumers, third-party payors, and direct purchasers alleged that the supply agreement was anticompetitive because it delayed Barr’s introduction of a lower-priced, generic version of Warner Chilcott’s oral contraceptive Ovcon.

Professor Grabowski analyzed the effect an earlier introduction of Barr’s generic version of Ovcon would have had on consumers and third-party payors. He showed that Warner Chilcott’s distribution of free samples resulted in an effective price discount substantially larger than the price discount Barr’s generic product likely would have provided. Because Warner Chilcott would have ended its distribution of free samples after generic entry, Professor Grabowski concluded that consumers and third-party payors would have paid more for the oral contraceptive had Barr introduced its generic product earlier rather than participating in the supply agreement with Warner Chilcott.

Warner Chilcott settled the cases with the consumer and third-party payor classes for attorneys’ fees and an agreement to distribute a small amount of free product to primary care physicians, health clinics, and charitable organizations. In approving the settlements, the court noted that the plaintiffs “faced significant risks in establishing both liability and damages” because of the savings that accrued to consumers from free samples.

Intel–McAfee MergerExpert: Timothy F. Bresnahan, Stanford University Law Firms: Arnold & Porter and Gibson, Dunn & Crutcher

Counsel for Intel Corporation retained Cornerstone Research and Professor Timothy Bresnahan of Stanford University to analyze the economic issues raised by the Federal Trade Commission (FTC) and the European Commission in their investigations of the proposed Intel–McAfee merger.

Intel, the world’s leading microprocessor manufacturer, agreed to acquire McAfee, Inc., a leading security software company, for $7.7 billion in August 2010. While the merger of firms supplying complementary products typically raises few competition concerns, both agencies explored whether the merged firm would have an incentive to establish a commercial or technical tie between Intel’s microprocessors and McAfee’s security software that would harm competition in security software markets. Cornerstone Research and Professor Bresnahan presented analyses about theories regarding the competitive effects of the proposed merger to the staff at both agencies, showing that the merged firm would have a strong incentive to continue Intel’s practice of encouraging independent software vendors to develop software that relies on its microprocessors.

At the end of the initial request phase of its investigation, the FTC concluded that the merger raised no competitive concerns. The European Com-mission approved the merger at the end of its first-phase investigation, conditional on commitments made by Intel about its continued cooperation with competing security software firms.

Aguilar et al. v. Atlantic Richfield Corporation et al.Expert: Michael C. Keeley, Cornerstone Research Law Firm: Munger, Tolles & Olson

The defendants, major gasoline refiners in California, had been accused of fixing prices, restricting capacity, and limiting production when California converted to cleaner-burning California Air Resources Board (CARB) gasoline. Shell Oil’s counsel retained Dr. Michael Keeley, a vice president of Cornerstone Research, to evaluate plaintiffs’ collusion theory in the underlying litigation. His research showed that Shell’s pricing, capacity, and pro-duction decisions were consistent with competition and contradicted plaintiffs’ claims of collusion. The California Supreme Court affirmed in a 7–0 vote the California Court of Appeal’s judgment in this case, awarding all defendants summary judgment.

SELECTED CORNERSTONE RESEARCH ANTITRUST AND COMPETITION CASES

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SELECTED CORNERSTONE RESEARCH ANTITRUST AND COMPETITION CASES

In re Cigarette Antitrust LitigationExpert: Kenneth G. Elzinga, University of Virginia Law Firm: Heller Ehrman

Class-action plaintiffs alleged that Philip Morris, Inc., R.J. Reynolds Tobacco Co., Brown & Williamson Tobacco Corp., Lorillard Tobacco Co., and Liggett Group, Inc., had illegally conspired to fix the wholesale prices of cigarettes sold in the United States over a period of several years. Counsel for Philip Morris retained Cornerstone Research and Professor Kenneth Elzinga of the University of Virginia to assess competition in the cigarette industry and to analyze the plaintiffs’ claims regarding the alleged conspiracy.

In his report, Professor Elzinga explained that the retail promotions did not display a pattern consistent with collusion nor did they move in lock-step or parallel fashion. Rather, they showed competition at work. His analysis also showed that changes in the defendants’ market shares contradicted the claim that cigarette prices had been rigged. Professor Elzinga concluded, “Based on my analysis, the plaintiffs’ cartel hypothesis should be rejected as unfounded.” Agreeing with Professor Elzinga’s analysis, U.S. District Court Judge J. Owen Forrester granted summary judgment for the defendants. The Eleventh Circuit upheld the finding.

Stacie Somers v. Apple Inc. Law Firm: Jones Day

In a case alleging an anticompetitive tie between Apple’s iPod and iTunes products, Cornerstone Research was retained to assess the economic basis for certifying a putative class of indirect purchasers of these products. Specifically, our expert assessed the feasibility of using a common method to calculate damages for members of the proposed class. The District Court of Northern California rejected the proposed class on the grounds that the plaintiff did not provide a common method for assessing impact.

The plaintiff brought an amended action accusing the defendant of antitrust violations regarding an update to its iTunes media player software that prohibited programs from removing encryption codes from music files sold through the iTunes store. The plaintiff’s amended complaint was dismissed with prejudice by the court, which stated that the plaintiff had insufficient evidence for a federal antitrust claim.

Jensen Enterprises Inc. v. Oldcastle Precast Inc. et al. Expert: Gregory L. Rosston, Stanford University Law Firm: Folger Levin & Kahn

The plaintiff, Jensen Enterprises Inc. (Jensen), a competitor of Oldcastle, alleged that Oldcastle and AT&T had colluded to create an improper and anti-competitive arrangement whereby Oldcastle gained monopoly power over precast concrete vault sales related to the AT&T wireline network. Counsel for Oldcastle retained Cornerstone Research and Dr. Gregory Rosston of Stanford University to address issues of market definition, liability, and damages.

Dr. Rosston concluded that most of the plaintiff’s allegations, even if true, would not result in antitrust harm to the plaintiff. Furthermore, Dr. Rosston demonstrated through an in-depth analysis of company data that Oldcastle did not charge developers monopoly prices and that the lack of monopoly prices was contrary to the plaintiff’s claims that AT&T’s policies harmed competition. Dr. Rosston’s analysis showed that there was in fact no evidence of harm to customers or competition.

The district court granted summary judgment in favor of the defendants, ruling that without elevated prices, there was no evidence of injury to competition.

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Google–ITA Software AcquisitionExpert: Timothy F. Bresnahan, Stanford University Law Firms: Axinn, Veltrop & Harkrider and Wilson Sonsini Goodrich & Rosati

Counsel for Google retained Cornerstone Research and Professor Timothy Bresnahan of Stanford University to analyze the competitive and efficiency effects of Google’s $700 million purchase of ITA Software (ITA). Google, supplier of a leading Internet search engine, agreed to purchase ITA, a pro-vider of flight search software used by airlines, such as American and United, and travel websites, such as Orbitz, Kayak, and Bing Travel. Through this acquisition, Google plans to offer new and innovative flight search services for consumers. In reviewing the transaction, the Department of Justice (DOJ) expressed concerns that Google might seek to deny flight search rivals’ access to ITA’s software or charge them higher prices for using ITA’s software.

Professor Bresnahan and Cornerstone Research conducted extensive analyses of competition, market structure in flight search, and merger-specific efficiencies issues, research that required analyzing pricing and cost data from ITA and Google. Professor Bresnahan and Dr. Michael Topper, a vice president of Cornerstone Research, presented the results of these analyses to the DOJ, demonstrating the potential innovations and cost reductions that would be unlocked by this acquisition and that Google has neither the ability nor the incentive to foreclose users of ITA’s software. They showed that any attempt to foreclose would be defeated by competition from other providers of flight search software and other providers of flight search services.

After an extensive review, the DOJ approved the acquisition, conditional on certain licensing and other commitments by Google.

High Fructose Corn Syrup Antitrust LitigationExperts: Kenneth G. Elzinga, University of Virginia, and Christopher M. James, University of Florida Law Firms: Jenner & Block; Mayer Brown & Platt; Williams & Connolly; and Winston & Strawn

In a class-action antitrust suit, a class of purchasers alleged that the five major high fructose corn syrup (HFCS) producers had conspired to raise the price of HFCS over a period of several years. The defendants retained Cornerstone Research, Professor Kenneth Elzinga of the University of Virginia, and Professor Christopher James of the University of Florida.

Professor Elzinga evaluated the plaintiffs’ collusion theory and concluded that the market evidence was consistent with competition and inconsis-tent with collusion. Professor James reviewed the plaintiffs’ model of damages and presented an alternative analysis.

U.S. District Court Judge Michael M. Mihm granted summary judgment to the defendants. Judge Mihm agreed with our experts’ analysis and found that the plaintiffs’ experts had based their conclusions on “very weak circumstantial evidence” and on “inferences that the Court has found to be not reasonably supported by the record.” The following year, in a controversial opinion, the Seventh Circuit reversed summary judgment and remanded the case. After a further round of expert reports, the case settled.

In re NASDAQ Market Makers Antitrust LitigationExpert: Allan W. Kleidon, Cornerstone Research Law Firms: Retained jointly by counsel for the codefendant market-makers

In dozens of antitrust lawsuits and a Department of Justice investigation, the plaintiffs alleged that NASDAQ dealers were engaging in “tacit collusion” to avoid quoting on odd-eighths. To research these allegations, counsel for the codefendant market makers retained Dr. Allan Kleidon of Cornerstone Research and an economics professor. Their research concluded that such collusion among NASDAQ dealers is “extraordinarily unlikely” to explain the observed clustering of quotes given the market’s structure, and “there is no responsible scientific basis for drawing a conclusion of collusion” from the original data. All matters have settled.

SELECTED CORNERSTONE RESEARCH ANTITRUST AND COMPETITION CASES

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Alexander “Sasha” Aganin Cornerstone Research

José Alberro Cornerstone Research

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