Expert Excluded For Failing To Apply Tampa Electric Standard When Defining Relevant Geographic Market

The district court in the Southeastern Milk Antitrust Litigation5 excluded a plaintiffs' expert because the expert testified that his definition of the relevant geographic market did not comport with the standard enunciated by the U.S. Supreme Court in Tampa Electric v. Nashville Coal Co.6 The court's decision is a stark reminder that practitioners must ensure that their experts are well-versed with key language from prior Supreme Court cases in their area of expertise.

The Southeastern Milk Antitrust Litigation is a multidistrict class action in the Eastern District of Tennessee brought by plaintiffs Food Lion and Fidel Breto (d/b/a Family Foods) on behalf of purchasers of processed milk alleging that several defendants, including the Dean Foods Company (Dean Foods), Dairy Farmers of America (DFA), and National Dairy Holdings (NDH), violated §§ 1 and 2 of the Sherman Act.7 As part of their suit, plaintiffs asserted claims for unlawful monopolization, attempted monopolization, and conspiracy to monopolize against defendant Dean Foods, and alleged that Dean Foods has used predatory conduct to obtain and maintain monopoly power in the processed milk market.8 Plaintiffs also alleged that Dean Foods conspired with DFA and NDH to monopolize the processed milk market through an agreement not to compete for sales of processed milk to retail stores.9

In support of their claims against Dean Foods, plaintiffs designated expert Professor Luke Froeb to testify regarding the relevant geographic market.10 Professor Froeb, who was a former Director of the Bureau of Economics at the Federal Trade Commission, identified the relevant geographic market by constructing an economic model of competition between milk producers and applying the "hypothetical monopolist/SSNIP" test set forth in the DOJ/FTC's Horizontal Merger Guidelines11 to ask whether a hypothetical monopolist who owns all the milk processing plants in a candidate market would find it profitable to raise price by a small but significant amount.12

Defendants moved to strike Professor Froeb's testimony contending that, although proper application of the SSNIP test is an accepted method to analyze the geographic market in an antitrust case, Professor Froeb only paid "lip service" to the SSNIP test and based his opinion on a theoretical model that was inconsistent with the applicable legal standards and real-world facts.13 Specifically, defendants claim that rather than comparing the hypothetical...