Litigation Support in Antitrust Situations
Heitger, Lester E., Crumbley, D. Larry, The CPA Journal
Accountants are uniquely qualified to provide advice and assistance in antitrust litigation. In antitrust disputes, accountants are called upon to identify and analyze relevant historical accounting case data. Forensic accountants are the ones best able to sort out the relevant accounting issues in the dispute and explain them to a judge and jury.
Since Daubert [509 U.S. 579, 113 S.Ct. 2786 (1993)], trial judges have had a special responsibility to ensure that testimony is not only relevant, but also reliable. Before permitting an individual to testify as an expert, a judge must determine whether the expert's reasoning and methodology can be appropriately applied to the facts of the dispute [Stagl v. Delta Airlines, Inc., 117 F.3d 76 (CA-2, 1997)]. In addition, judges must take into consideration an expert's background and practical experience when deciding whether the expert is qualified to render a report and testify [McColluck v. H.B. Fuller Co., 61 F.3d 1038 (CA-2, 1995)]. A judge may decide that an expert's expertise is too general or too deficient to qualify [Trumps v. Toastmaster, 969 F. Supp. 247 (S.D. N.Y. 1997)]. A judge also may decide that research and studies cited are too dissimilar to the facts involved in the litigation [General Electric Co. v. Joiner, 522 U.S. 136, 118 S.Ct. 512(1997)].
Overview of Antitrust Laws
U.S. antitrust laws are an outgrowth of the reaction to business practices during the early years of the country's industrial development. Some businesses were seen to be using any tactic at their disposal to force competitors out of business and create a monopoly, then raising prices to relatively high levels. This practice was particularly common in the railroad and oil industries.
Federal legislation prohibited the formation and continuation of monopolies except when in the best interest of the public (for example, many local electric, gas, and water utilities).
It is easier to oppose a monopoly, however, than to agree upon whether one exists. In the recent antitrust litigation brought against the Microsoft Corporation, a court found the company to be a monopoly, but the final settlement over its business practices did not satisfy its critics. Similarly, widespread deregulation in formerly monopolistic industries has not always resulted in marketplaces as competitive as critics have desired.
Actions to Be Taken
The antitrust process begins with a complaint filed with the U.S. government by an individual who believes that a company is in violation of antitrust laws. If the government agrees with the complaint, an attempt will be made to remedy the situation by negotiations and other measures. If this attempt fails, the U.S. Justice Department may start proceedings against the business, to force compliance with antitrust laws through the courts.
Sometimes monopoly complaints are not accepted. The complaint might not provide enough information or evidence to pursue the issue, or the Justice Department may not have the resources to pursue all valid complaints. Individuals or other companies have the recourse of filing a lawsuit themselves under the antitrust laws.
The Role of Accountants
In antitrust disputes, accountants may be called upon to determine whether there is liability under the antitrust laws. The primary issue that forensic accountants address is whether a defendant has engaged in predatory pricing. Pricing below an appropriate measure of a defendant's costs is a requirement to predatory pricing liability [Brooke Group Ltd. v. Brown and Williamson Tobacco Corp., 209 U.S. 209 (1993)]. Accountants may also be asked to calculate the damages a party has sustained as a result of a violation of the antitrust laws.
For example, in an antitrust suit in Indianapolis, a grocery chain was accused by another grocery company of engaging in predatory pricing activities during an 18-month period. The accused grocery chain had gone from a profitable position in earlier periods to significant losses during the alleged predatory pricing period. …