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28 Antitrust 90 (2013-2014)
Life after Comcast: The Economist's Obligation to Decompose Damages across Theories of Harm

handle is hein.journals/antitruma28 and id is 196 raw text is: AR TIC LES

Life After Comcast:
The Economist's
Obligation to
Decompose Damages
Across Theories
Of Harm
BY KEVIN CAVES AND HAL SINGER
HE SUPREME COURT IN Comcast Corp.
v. Behrend' reversed certification of a class because
the plaintiffs' economist could not decompose
damages between the two principal theories of
harm or alleged anticompetitive restraints: clus-
tering of cable systems (a horizontal restraint), and exclusive
dealing of sports programming (a vertical restraint). Comcast
confirms that economic experts need not decompose dam-
ages in Section 2 monopoly broth cases involving two or
more theories of harm, provided that all theories remain part
of the case. If one or more theories do not survive scrutiny
(e.g., they are deemed procompetitive or not susceptible to
common proof of injury), Comcast also highlights the need
for the economist to adhere to the basic principle that the
harm suffered by class members and the resulting damages
they seek to recover must flow only from the anticompetitive
conduct encompassed by the surviving theory (or theories).
From an economic perspective, these standards for class
certification imply that allocation of damages may be neces-
sary in cases where one theory of harm is sufficient to gener-
ate price effects. In contrast, in cases where both theories of
harm are necessary to generate price effects-that is, remov-
ing either theory or restraint would cause prices to revert to
competitive levels in the hypothetical but-for world used to
Kevin Caves is a Senior Economist and Hal Singer is a Principal at Econo-
mists Incorporated. Prior to the class certification hearing, both authors
served as consultants to the plaintiffs in Behrend v. Comcast. The authors
thank Ellen Meriwether, Eric Cramer, and Andrew Curley for valuable com-
ments, and Joshua Wright for the kernel of the idea relating to necessary
versus sufficient conditions.

quantify overcharges-the economic expert should not be
required to allocate damages: If one theory of harm is dis-
carded, then damages should be attributed in full to the sole
surviving theory of harm. Of course, no allocation would be
needed if both theories of harm survive scrutiny, or if neither
survives.
Allocating damages across different sources of harm can be
tricky business. By way of analogy, consider a three-legged
chair, which remains standing because exactly three separate
points of reference (the three legs) are necessary to delineate
a flat plane (the floor). Removal of one of the legs causes the
stool to lose all functionality, as opposed to (say) only one-
third of its value. More generally, regardless of which of the
legs is removed, and regardless of exactly how many legs are
removed, the end result is the same.
It is not clear that the plaintiffs in Comcast ever articulat-
ed whether Comcast's horizontal clustering of cable proper-
ties-the sole surviving theory of harm-served the same
causal role in supporting anticompetitive harm as each of the
chair's legs serves in supporting the occupant. If so, then
horizontal clustering would have been necessary for Comcast
to raise prices above competitive levels, but not sufficient to
do so in the absence of the vertical restraints. Under such a
fact pattern, treating damages as separable, and asking plain-
tiffs to allocate overcharges between Comcast's horizontal
and vertical restraints, would be a bit like asking what share
of the chair's functionality is supported by each leg.
A Brief History of Comcast
To understand how we got here, a brief history of the case is
in order. Comcast provides cable television services to resi-
dential and commercial customers in Philadelphia, among
other geographic areas. Starting in the late 1990s, Comcast
engaged in a series of transactions to acquire competitors'
cable systems in the Philadelphia region in exchange for
Comcast's own systems located in other regions. By 2007,
Comcast's local market share in Philadelphia had expanded
significantly (from less than 25 percent to as much as 70 per-
cent).2
The plaintiffs are cable subscribers who sued Comcast for
alleged antitrust violations. The plaintiffs originally brought
a complaint against Comcast that focused narrowly on Com-
cast's swaps and acquisitions in the Philadelphia metropoli-
tan area. The original complaint was built on a clustering the-
ory, which posited that the aggregation of adjacent cable
properties could raise entry barriers for cable overbuilders,
such as RCN, that construct new infrastructure in areas
already served by incumbent cable systems. Several govern-
ment studies had found a positive correlation between clus-
tered areas and cable prices.' And a working paper (by one of
the authors) had found a negative correlation between clus-
tering and overbuilding activity.4 Add these findings togeth-
er and one gets a viable antitrust theory of harm.
But what was the mechanism that permitted cable operators
in these clustered areas to raise cable prices? Were entrants sim-

90  -  ANTITRUST

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