COMPETITION & MONOPSONY IN LABOR MARKETS THEO RY, EV ID EN C - - PowerPoint PPT Presentation

THEO RY, EV ID EN C E, & A N TITRUST IM P LIC A TIO N S

COMPETITION & MONOPSONY IN LABOR MARKETS

K e vin Ca ve s, PhD E c o no mists I nc o rpo ra te d April 23, 2014

GOOD MORNING(!)

2

OVERVIEW

• Pa rt I

: E c o no mic T he o ry & E mpiric a l E vide nc e

• Ne c e ssa ry c o nditio ns fo r mo no pso ny po we r to ha ve

a ntic o mpe titive e ffe c ts

• E

mpiric a l e vide nc e : mo no pso ny vs. c o mpe titive wa g e de te rmina tio n in la b o r ma rke ts

• Pa rt I

I : Ca se Disc ussio ns

• Jo hnso n v. Arizo na Ho spital & He althc are Ass’ n
• I

n Re : Hig h-T e c h E mplo ye e Antitrust L itig atio n

3

ECONOMIC THEORY

• Ne c e ssa ry Co nditio ns fo r Antic o mpe titive E

xe rc ise

• f Buye r Po we r
• De ma nd suffic ie ntly c o nc e ntra te d fo r b uye rs to

(c o lle c tive ly) e xe rc ise sig nific a nt ma rke t po we r o ve r se lle rs

• No n-issue fo r re ta il ma rke ts (b uye rs ta ke ma rke t pric e a s g ive n)
• Supply suffic ie ntly unc o nc e ntra te d fo r se lle rs to b e

a to mistic / unc o o rdina te d

• Hig h c o nc e ntra tio n o n b o th side s wo uld imply “b ila te ra l

b a rg a ining ” situa tio n

• E

c o no mic pie divide d b a se d o n b a rg a ining skill; no c le a r a ntic o mpe titive e ffe c ts

4

ECONOMIC THEORY

• Ne c e ssa ry Co nditio ns (c o ntinue d)
• Supply c urve must slo pe upwa rd
• Buye r fa c e s tra de o ff b e twe e n
• Buying mo re inputs to e xpa nd o utput; a nd
• Pa ying hig he r pric e pe r unit o f input
• Co st minimiza tio n ↔ Pro fit ma ximiza tio n
• T

ypic a l fo c us: Buye rs in input ma rke ts, pa rtic ula rly la b o r ma rke ts

5

ECONOMIC THEORY

• Co mpe titio n: E

mplo ye rs ta ke ma rke t wa g e a s g ive n

 W = De ma nd = MRPL

6

ECONOMIC THEORY

• Mo no pso ny: E

mplo ye r c a n ra ise (lo we r) wa g e b y re stric ting (e xpa nding ) hiring  MRPL = MC L > W

7

ECONOMIC THEORY

• F

la t se lle r supply  Mo no pso ny po we r irre le va nt

• Ho lds fo r input ma rke ts whe n supplie rs ha ve hig h F

C, lo w MC

• L

e ss like ly to ho ld in la b o r ma rke ts

8

EMPIRICAL TESTS IN LABOR MARKETS

• T

e sting c o mpe ting hypo the se s: mo no pso ny vs. c o mpe titio n

• Ca rd & K

re ug e r (AE R, 1994)

• April 1992: Ne w Je rse y minimum wa g e inc re a se d ($4.25 to $5.05); no

c ha ng e in minimum wa g e in ne ig hb o ring PA

• Co mpa re c ha ng e in e mplo yme nt (F

T E ) in NJ a nd PA, b e fo re vs. a fte r minimum wa g e hike

• F

T E inc re a se d in NJ re la tive to PA; c o nsiste nt with mo no pso ny po we r in lo c a l la b o r ma rke t

• Spa rke d lo ng / c o ntro ve rsia l/ o ng o ing lite ra ture o f “diffe re nc e -in-

diffe re nc e s” a ppro a c he s to te a se o ut e ffe c ts

• F

e ldma n & Sc he ffle r (1982); L ink & Russe l (1981)

• Unde r mo no pso ny, hig he r e mplo ye r c o nc e ntra tio n  L
• we r wa g e s
• So me e vide nc e o f lo we r RN wa g e s whe n ho spita ls mo re c o nc e ntra te d

9

PART II: CASE DISCUSSIONS

• 1. Jo hnso n v. Arizo na Ho spital & He althc are Ass’ n
• 2. I

n Re : Hig h-T e c h E mplo ye e Antitrust L itig atio n

10

JOHNSON V. AZHHA

• Pla intiffs a lle g e d c o nspira c y a mo ng ho spita l me mb e rs o f

Arizo na Ho spita l & He a lthc a re Ass’ n (AzHHA) to suppre ss b ill ra te s fo r te mpo ra ry nurse s

• AzHHA ma inta ine d “re g istry” o f nurse sta ffing a g e nc ie s sinc e

la te 1980s

• I

nitia l fo c us: Sc re e ning fo r q ua lity/ minimum sta nda rds

• L

a te 1990s: T

• b e liste d o n re g istry a g e nc ie s must ne g o tia te so le ly

w/ AzHHA

• Ag e nc ie s o b lig e d to imple me nt unifo rm b ill ra te s a c ro ss me mb e r

ho spita ls fo r pe r die m & tra ve l nurse s

• Pla intiffs a lle g e d AzHHA’ s unifo rm b ill-ra te sc he dule fa c ilita te d

a ntic o mpe titive e xe rc ise o f mo no pso ny po we r & a rtific ia lly de pre sse d nurse s’ wa g e s

• (Disc lo sure : Sing e r a nd I

wo rke d fo r Pla intiffs)

11

JOHNSON V. AZHHA

• Proof of Impac t: T

wo-Pronge d Approac h

1. I de ntify pla usib le e c o no mic the o ry—with c o rro b o ra ting e vide nc e —c o nne c ting c ha lle ng e d c o nduc t to a ntic o mpe titive e ffe c ts

• Assuming c o nduc t o c c urre d, do e s the e c o no mic lite ra ture po int to

pric e (o r wa g e ) e ffe c ts tha t wo uld b e fe lt b y Cla ss me mb e rs g e ne ra lly?

• Ca n e ffe c ts b e sho wn in the insta nt c a se with c o mmo n e vide nc e ?

2. I de ntify pla usib le me c ha nism—suc h a s a rig id pric ing struc ture —tha t wo uld tra nsmit the se a ntic o mpe titive e ffe c ts to a la rg e sha re o f the me mb e rs o f the pro po se d c la ss

• Is c la ss suffic ie ntly “c o he sive ” suc h tha t the c ha lle ng e d c o nduc t

wo uld ha ve b e e n fe lt b y a ll o r ne a rly a ll puta tive c la ss me mb e rs?

12

JOHNSON V. AZHHA

• Ste p 1:
• E

c o no mic lite ra ture o n e xe rc ise o f mo no pso ny po we r in nursing la b o r ma rke ts

• I

nve rse re la tio nship b e twe e n ho spita l c o nso lida tio n a nd nurse c o mpe nsa tio n; c o nsiste nt with mo no pso ny po we r

• Diffe re nc e -diffe re nc e s b e nc hma rk: E

mpiric a l te st fo r e xe rc ise

• f mo no pso ny po we r b y AzHHA
• Co mpa re c ha ng e in c o mpe nsa tio n in Arizo na nurse s o ve r time to

c ha ng e s fo r te mpo ra ry nurse s in ne ig hb o ring sta te s (whe re c ha lle ng e d c o nduc t wa s a b se nt)

• Simila r to Ca rd & K

rue g e r

• Re g re ssio n a na lysis c a n c o ntro l fo r po te ntia lly c o nfo unding fa c to rs

(e .g ., de mo g ra phic s, sta te e c o no mic tre nds)

13

JOHNSON V. AZHHA

• Ste p 2:
• Pric ing struc ture linking nurse c o mpe nsa tio n to fixe d b ill ra te
• AzHHA pa id c o mmo n ho urly ra te to sta ffing a g e nc ie s, whic h

pa sse d thro ug h a pe rc e nta g e o f tha t b ill ra te to c la ss me mb e rs

• Pla intiffs’ e xpe rt (Sing e r) sho we d b ill ra te s po sitive ly c o rre la te d

w/ pa y ra te s

• Co rre la tio n a na lysis c o rro b o ra te d b y do c ume nts & te stimo ny
• “I

n fa c t, Dr. Sing e r’ s da ta indic a te s tha t b ill ra te s we re po sitive ly c o rre la te d with pa y ra te s fo r six type s o f te mpo ra ry nursing sta ff, b o th pe r die m a nd tra ve ling , a t six AzHHA me mb e r a g e nc ie s fo r a ll a va ila b le ye a rs. Mo re o ve r, it sta nds to re a so n tha t, a s the a g e nc ie s ha ve te stifie d a nd is re ve a le d b y the fina nc ia l re c o rds tha t ha ve b e e n pro duc e d thro ug h the c o urse o f disc o ve ry, if bill ra te s we re to rise , so would

te mpora ry nursing wa g e s.” - Jo hnso n, 2009 WL

5031334 a t *8

14

JOHNSON V. AZHHA

• Outc ome
• Distric t c o urt c e rtifie d c la ss o f pe r-die m nurse s
• Se ttle me nt re a c he d fo r ~$22.5M
• Co urt de c line d to c e rtify tra ve l nurse c la ss
• T

ra ve l nurse s re c e ive d a nc illa ry b e ne fits (ho using , tra ve l stipe nds)

• “Offse t” the o ry De fe nda nts ma y ha ve a lte re d a no the r

dime nsio n o f c o mpe nsa tio n, ne g a ting impa c t fo r a t le a st so me puta tive c la ss me mb e rs

15

JOHNSON V. AZHHA

• T

ake away

• Offse ts a nd o the r c o mplic a tio ns in c o mpe nsa tio n struc ture s

pre ve nte d c e rtific a tio n in se ve ra l o the r c a se s, e .g ., Re e d v. Advo c ate :

“T he Re e d de c isio n is c o nsiste nt with a de ve lo ping b o dy o f c a se la w re je c ting c la ss c e rtific a tio n with re spe c t to a lle g a tio ns o f a Se c tio n 1 wa g e c o nspira c y. Prio r wa g e c o nspira c y c a se s…re je c te d c la ss c e rtific a tio n b a se d la rg e ly

• n

the g re a t va rie ty

• f

e mplo ye e c ha ra c te ristic s tha t influe nc e wa g e s a nd va ria tio n in wa g e s a nd othe r

c ompe nsa tion pa id to e mploye e s. T

his va ria tio n is a ma jo r o b sta c le to pla intiffs c la iming the y c a n pro ve impa c t o n a c la ss-wid e b a sis with c o mmo n pro o f…”

– Blo c h & Pe rlma n, Antitrust, Vo l. 24, No . 3, Summe r 2010 (e mpha sis a dde d).

16

JOHNSON V. AZHHA

• T

a ke a wa y

• “Na ke d” wa g e fixing ma y b e linke d mo re e a sily to a b e nc hma rk tha n
• the r c o nduc t (a g re e me nts no t to c o mpe te , info rma tio n e xc ha ng e s)
• “Alle g a tio ns o f na ke d wa g e -se tting pa c ts a re pe rha ps the mo st a na lo g o us to the

typic a l pric e -fixing c a se s in o utput ma rke ts. T he e mpiric a l me tho do lo g ie s pre se nte d b y pla intiffs in the se c a se s, inc luding the b e nc hma rk a nd re g re ssio n a ppro a c he s de sc rib e d a b o ve , a re the re fo re mo re like ly to suppo rt c la ss c e rtific a tio n tha n in o the r type s o f la b o r ma rke t c a se s. “

• -Jo hnso n, Da vid, & T
• re lli, Antitrust, F

a ll 2010

• Alle g a tio ns invo lving a sing le e ntity ma y a lso b e mo re a me na b le to

c o mmo n pro o f

• “T

he c e rtific a tio n o f a c la ss o f pe r die m nurse s in Jo hnso n ma y b e e xplaine d b y the fa c t tha t a sing le tra de a sso c ia tio n se t unifo rm b ill ra te s tha t its ho spita l me mb e rs pa id to a g e nc ie s tha t e mplo ye d the nurse s, a nd the re wa s e vide nc e tha t the se unifo rm b ill ra te s c o rre la te d with c o mpe nsa tio n the nurse s a c tua lly re c e ive d.” – Blo c h & Pe rlma n, Antitrust, Summe r 2010

• Ho we ve r, Hig h-T

e c h E mplo ye e c a se pro vide s impo rta nt c o unte r- e xa mple to this re c e ive d wisdo m

17

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

18

• “I

f yo u hire a sing le o ne o f the se pe o ple , tha t me a ns wa r.”

– Ste ve Jo b s to Se rg e y Brin, F e b ruary 2005

Steve Jobs in 2008. Associated Press

OVERVIEW: IN RE HIGH-TECH

• Ba c kg ro und
• Multiple a lle g e d c o nspira to rs/ a g re e me nts/ time pe rio ds
• Dive rse a rra y o f c la ss me mb e rs/ jo b c a te g o rie s
• No e xplic it wa g e fixing
• Pla intiffs’ pro o f o f impa c t
• T

wo pro ng e d fra me wo rk

• F
• unde d in the o ry; fa c t & da ta -inte nsive
• De fe nda nts’ c ritiq ue s
• L

a rg e ly c o nc e ptua l/ me tho do lo g ic a l

• Unifo rmly re je c te d

19

OVERVIEW: IN RE HIGH-TECH

• T

ake aways - Pr e vie w

• E

ve n c o mple x mo no pso ny c la ims ma y b e fo und a me na b le to c o mmo n pro o f

• Pla intiffs ma y e xplo it da ta -ric h e nviro nme nt to sho w (1)
• ve ra ll e ffe c ts; (2) pric ing struc ture
• He a vy re lia nc e o n a b stra c t c ritiq ue s= risky de fe nse

stra te g y

• Pla intiffs’ da ta -drive n a ppro a c h c a lls fo r e c o no me tric a lly

inte nsive re spo nse

• E

xplo re a lte rna tive de fe nse stra te g ie s

20

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Bac kgr
• und
• Alle g e d c o nspira c y a mo ng ma jo r Silic o n Va lle y firms
• “[I

]nte rc o nne c te d we b o f e xpre ss b ila te ra l a g re e me nts”

• Aime d to "pre ve nt a ‘ b idding wa r’ fo r ta le nt tha t wo uld drive up

wa g e s…"

• Anti-so lic ita tio n (“No c o ld c a ll”) a g re e me nts
• F
• rb a de unso lic ite d jo b o ffe rs to e mplo ye e s o f c o mpe tito rs
• 2010 DOJ Ca se

Se ttle me nt

• De fe nda nts a g re e d no t to inte rfe re with so lic ita tio n, c o ld c a lling ,

e tc . fo r 5 ye a rs

• No a dmissio n o f g uilt
• No pro visio ns fo r c o mpe nsa tio n; c ivil suit file d 2013

21

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Ba c kg round: Pla intiffs’ Alle g a tions
• Co ld c a lling = ke y c o mpe titive to o l
• Pa rtic ula rly fo r hig h te c h/ hig h skill la b o r
• Co ld c a lling  Co mmo n inc re a se in c o mpe nsa tio n & mo b ility
• Be ne fits no t limite d to tho se re c e iving c a lls
• E

a c h b ila te ra l a g re e me nt a pplie d to a ll e mplo ye e s

• No t limite d b y g e o g ra phy, jo b func tio n, pro duc t, time pe rio d
• No t re la te d to spe c ific b usine ss o r c o lla b o ra tio n
• Pla intiffs initia lly so ug ht to c e rtify All E

mplo ye e Cla ss

• All sa la rie d e mplo ye e s, 2005 – 2009
• Pla intiffs’ b a c ksto p: T

e c hnic a l Cla ss

• Sa la rie d te c hnic a l, c re a tive , a nd R&D e mplo ye e s

22

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Bac kgr
• und: Cour

t’s Initial F indings

• Distric t Co urt initia lly unc o nvinc e d Pla intiffs c o uld

pro ve c o mmo n impa c t

• Co urt “e xpre sse d c o nc e rn tha t Pla intiffs’ e xa mple s—suc h a s

e ma il e xc ha ng e s b e twe e n CE Os a nd disc re te huma n re so urc e s do c ume nts fro m c e rta in De fe nda nts in pa rtic ula r ye a rs—mig ht no t b e suffic ie nt”

• Cla ss c e rt de nie d o n pre do mina nc e g ro unds (with

le a ve to a me nd)

• Cite d la c k o f me tho ds/ e vide nc e “to sho w tha t De fe nda nts

ma inta ine d suc h rig id c o mpe nsa tio n struc ture s tha t a suppre ssio n o f wa g e s to so me e mplo ye e s wo uld ha ve a ffe c te d a ll o r ne a rly a ll Cla ss me mb e rs.”

23

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Bac kgr
• und: L

ate st De ve lopme nts

• Pla intiffs na rro we d c la ss to te c hnic a l e mplo ye e s

wo rking fo r a firm pa rtic ipa ting in a t le a st o ne a nti- so lic ita tio n a g re e me nt

• Co urt c e rtifie s T

e c hnic a l Cla ss (Oc t 2013)

• Co urt de nie s mo tio n to e xc lude te stimo ny o f Pro f.

L e a me r, Pla intiffs’ e c o no mist (April 2014)

• Co urt’ s de nia l o f Daub e rt mo tio n de lve s into nume ro us

te c hnic a l/ e c o no me tric issue s

24

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Plaintiffs’ Road Map T
• Pr
• ving Impac t
• Use e c o no mic the o ry, do c ume nts, & sta tistic a l

a na lysis to sho w:

• (1) E

vide nc e o f g e ne ra l pric e e ffe c ts;

• Anti-so lic ita tio n a g re e me nts suppre sse d wa g e s b y

pre ve nting e mplo ye e s fro m disc o ve ring the ir full e c o no mic va lue to e mplo ye rs

• (2) E

vide nc e o f pric ing struc ture

• Me c ha nism thro ug h whic h wa g e suppre ssio n a ffe c ts a ll o r

ne a rly a ll Cla ss me mb e rs

• F
• llo ws two -pro ng e d a ppro a c h de ve lo pe d b y

Sing e r in Jo hnso n (c ite d in Class Ce rt Orde r a t 53)

25

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Str

uc tur e of Plaintiffs’ E vide nc e

• Ge ne ra l Wa g e E

ffe c ts

• E

c o no mic the o ry: ma rke t pric e disc o ve ry/ a symme tric info rma tio n

• Do c ume nts : “Impo ssib le to ke e p se c re t…”
• Sta tistic a l a na lysis:
• Be fo re / a fte r re g re ssio n
• Co mmo n Wa g e Struc ture
• E

c o no mic the o ry: L

• ng -te rm c o ntra c ting ; inte rna l e q uity
• Do c ume nts: “sa la ry pla nning to o ls,” “e q uity re po rts,” ma na g e ria l

disc re tio n (o r la c k the re o f)

• Sta tistic a l a na lysis:
• Co mmo n fa c to r re g re ssio ns
• Co rre la tio ns: Jo b title c o mp with T

e c h E mplo ye e a vg .

• Re g re ssio ns: L

ike c o rre la tio ns, b ut c o ntro l fo r firm pe rfo rma nc e ; lo c a l e c o no mic c o nd itio ns; a llo w fo r la g g e d e ffe c t

26

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• E

c onomic T he or y: L e ame r Opinion

• Co ld c a lling tra nsmits info rma tio n o n sa la rie s &

b e ne fits a c ro ss e mplo ye e s & firms

• I

nfo rma tio n ma y a ffe c t sa la rie s a c ro ss the la b o r ma rke t

• L

e a me r’ s hypo the sis: Anti-so lic ita tio n a g re e me nts impa ire d marke t pric e disc o ve ry b y limiting info rma tio n a va ila b le to e mplo ye e s

27

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• L

e ame r Opinion: “Mar ke t Pr ic e Disc ove r y”

• Sta nda rd supply & de ma nd mo de l a ssume s

e mplo ye rs & e mplo ye e s symme tric a lly info rme d a b o ut la b o r ma rke t c o nditio ns

• Ma rke t pric e disc o ve ry=pro c e ss o f e sta b lishing ne w

c o mpe titive e q uilib rium

• I

nc re a se in de ma nd  e mplo ye e sho rta g e  hig he r wa g e

• Assume s e mplo ye e s po sse ss e no ug h info rma tio n to

pe rc e ive tha t o the r e mplo ye rs wo uld b e willing to hire the m fo r mo re tha n wha t the y a re c urre ntly e a rning

28

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

29

• E

quilibr ium Adjustme nt Pr

• c e ss

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• L

e ame r Opinion: Infor mation E c onomic s

• L

e a me r re lie s o n the o rie s o f Ac ke rlo f, Stig litz, Spe nc e

• 2001 No b e l la ure a te s “fo r the ir a na lyse s o f ma rke ts with

a symme tric info rma tio n.”

• Cla ss c e rt de c isio n c ite s Stig litz’ s No b e l le c ture :
• “e ve n a sma ll a mo unt o f info rma tio n impe rfe c tio n c o uld ha ve a

pro fo und e ffe c t o n the na ture o f the e q uilib rium.”

• “T

he fa c t tha t a c tio ns c o nve y info rma tio n le a ds pe o ple to a lte r the ir b e ha vio r, a nd c ha ng e s ho w ma rke ts func tio n. T his is why info rma tio n impe rfe c tio ns ha ve suc h pro fo und e ffe c ts.”

• I

nte re sting ly, whe n studying the la b o r ma rke t, Stig litz fo und info rma tio n impe rfe c tio ns wo uld inc re a se the e q uilib rium wa g e (“e ffic ie nc y wa g e the o ry”)

30

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Infor

mation Asymme tr y - Sample Doc ume nt

• “[i]t’ s impo ssib le to ke e p so me thing like this a se c re t.

T he pe o ple g e tting c o unte r o ffe rs ta lk, no t just to Go o g le rs a nd e x-Go o g le rs, b ut a lso to the c o mpe tito rs whe re the y re c e ive d the ir o ffe rs (in the ho pe s o f impro ving the m), a nd tho se c o mpe tito rs ta lk to o , using it a s a to o l to re c ruit mo re Go o g le rs…it fe e ls like my lo ya lty is b e ing punishe d.”

• Go o g le e mplo ye e (Class Ce rt Orde r a t 39)

31

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Ge ne r

al Wage E ffe c ts: E c onome tr ic s

• L

e a me r’ s “Co nduc t Re g re ssio n”

• De pe nde nt va ria b le = re a l a nnua l c o mpe nsa tio n
• Co nduc t va ria b le = “fra c tio n o f mo nths in e a c h ye a r during

whic h the e mplo ye r wa s invo lve d in o ne o r mo re o f the a g re e me nts.”

• Co ntro l va ria b le s: Ag e , se x, ye a rs a t c o mpa ny, firm

re ve nue , firm ne w hire s, industry-wide e ffe c ts

• Yie lds e stima te o f a ve ra g e ne t unde r-c o mpe nsa tio n

32

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Common Wage Str

uc tur e : L e ame r Opinion

• L

a b o r ma rke ts diffe r fro m c o mmo dity ma rke ts

• “I

f wo rke rs we re c o mmo ditie s, e ve ry sma ll c ha ng e to e xte rna l o r inte rna l c o nditio ns wo uld le a d to re c o ntra c ting , se pa ra tio n, o r te rmina tio n. T his wo uld c re a te e no rmo us unc e rta inty a nd disruptio n a nd inse c urity fo r e mplo ye r a nd e mplo ye e .” - L e a me r Re p. ¶ 102.

• F

irms & e mplo ye e s se e k to e sta b lish lo ng -te rm re la tio nships, in pa rt b y pro mo ting a fe e ling o f “fa irne ss tha t c a n tra nsla te into a sha ring o f . . . [a firm’ s] re wa rds with mo re e q ua lity tha n a ma rke t mig ht o the rwise pro duc e .” I

• d. ¶ 104.

33

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Common Wage Str

uc tur e : L e ame r Opinion

• “Dr. L

e a me r a lso no te d tha t the do c ume nta ry e vide nc e sho we d tha t De fe nda nts e a c h e mplo ye d c o mpa ny-wide c o mpe nsa tio n struc ture s tha t inc lude d g ra de s a nd title s, a nd tha t hig h-le ve l ma na g e me nt e sta b lishe d ra ng e s o f sa la rie s fo r g ra de s a nd title s, whic h le ft little sc o pe fo r individua l va ria tio n.”

• Orde r Re : Mo tio n to E

xc lude at 10

• L

e a me r: “a b ro a d pre e mptive re spo nse [to the thre a t o f c o ld c a lls] is c o mple te ly a na lo g o us to sa la ry inc re a se s tha t a re tie d to info rma tio n pro vide d b y e mplo yme nt se rvic e s re g a rding the c o mpe nsa tio n o ffe re d b y the ‘ ma rke t.’

• Suppl. Class Ce rt. Re p. ¶ 15

34

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Common Wage Str

uc tur e - Doc ume nts

• Whe n Apple c o nside rs a ne w hire , “c o mpa r[ing ] the c a ndida te ” to

the e xisting e mplo ye e s o n the te a m the y wo uld jo in “wa s the b ig g e st de te rmining fa c to r o n wha t sa la ry we g a ve .”

• F
• rme r Apple T

e c hnic al Re c ruite r & Staffing Manag e r

• L

uc a sF ilm ma de re g ula r “[C]a ll-O]ut [E ]q uity A]djustme nt[s]”— individua l c o mpe nsa tio n inc re a se s fo r the e xplic it purpo se o f “a lig n[ing ] the e mplo ye e mo re a ppro pria te ly in the ir sa la ry ra ng e . . . [a nd] b a se d o n ho w tha t e mplo ye e a lig ns with the ir inte rna l pe e r g ro up b a se d o n the sa me se t o f c rite ria .”

• F
• rme r L

uc asF ilm Ope rating Offic e r

• “[y]o u c a n’ t a ffo rd to b e a ric h ta rg e t fo r o the r c o mpa nie s..[the ] lo ng -

te rm . . . rig ht a ppro a c h is no t to de a l with the se situa tio ns a s o ne -o ff’ s b ut to ha ve a syste matic appro ac h to c o mpe nsa tio n tha t ma ke s it ve ry diffic ult fo r a nyo ne to g e t a b e tte r o ffe r..”

• Go o g le Se nio r VP

35

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Common Wage Str

uc tur e - E c onome tr ic s

• L

e a me r’ s “Co mmo n F a c to rs” re g re ssio n

• Ana lyze d e mplo ye e -spe c ific c o mpe nsa tio n
• 90% o f va ria tio n in pa y e xpla ine d b y c o mmo n fa c to rs (a g e ,

title , mo nths a t c o mpa ny e tc .)

• “[t]he fa c t tha t ne a rly a ll va ria b ility in c la ss me mb e r

c o mpe nsa tio n a t a ny po int in time c a n b e e xpla ine d b y c o mmo n va ria b le s me a ns the re wa s a syste ma tic struc ture to e mplo ye e c o mpe nsa tio n a t e a c h o f the De fe nda nt firms.” - Class Ce rt. Ope ning Re p. ¶130

• Co mb ine d with sta b ility o f re g re ssio n c o e ffic ie nts o ve r time ,

sug g e sts “c o mpe nsa tio n o f c la ss me mb e rs te nde d to mo ve to g e the r o ve r time a nd in re spo nse to c o mmo n fa c to rs.” I d.

36

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Common Wage Str

uc tur e - E c onome tr ic s

• Co mmo n F

a c to rs a na lysis initia lly re je c te d

• Co urt fo und the a na lysis do e s no t pro ve rig idity a c ro ss jo b

title s (o nly within the m)

• Co urt a lso re je c te d L

e a me r’ s “Co mpe nsa tio n Mo ve me nt Cha rts,” (sho wing mo ve me nts o ve r time fo r o nly 20 jo b title s, mo stly fro m T e c hnic a l Cla ss)

37

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Common Wage Str

uc tur e - E c onome tr ic s

• I

n supple me nta l re po rt, L e a me r c o rre la te d, fo r e a c h firm:

• Avg . c o mpe nsa tio n b y jo b title ; a nd,
• Avg . c o mpe nsa tio n fo r T

e c hnic a l Cla ss (within firm)

• T

wo se ts o f c o rre la tio ns:

• Co mpe nsa tio n le ve ls (lo ng -te rm mo ve me nts)
• Ye a r-to -ye a r c ha ng e s (sho rt-te rm)
• “Va st ma jo rity” o f T

e c hnic a l Cla ss jo b title s po sitive ly c o rre la te d with T e c hnic a l Cla ss a ve ra g e

38

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Common Wage Str

uc tur e - E c onome tr ic s

• L

e a me r a lso re g re sse d jo b title c o mpe nsa tio n o n se ve ra l fa c to rs, inc luding

• Ave ra g e T

e c hnic a l Cla ss c o mpe nsa tio n (c urre nt ye a r)

• Ave ra g e T

e c hnic a l Cla ss c o mpe nsa tio n (prio r ye a r)

• F

irm re ve nue ; F irm jo b g ro wth; L

• c a l e c o no mic c o nditio ns
• “Va st ma jo rity” o f c la ss b e lo ng to jo b title s tha t

sho we d Co rre la tio n b e twe e n jo b title sa la ry a nd a ve ra g e sa la ry in c urre nt ye a r, a nd prio r ye a r’ s a ve ra g e

39

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• De fe nda nt Critique s
• Co mpe nsa tio n hig hly individua lize d; se t b y hundre ds o f

ma na g e rs, re spo nsib le fo r ta ilo ring pa y b y re wa rding hig h-a c hie ve rs

• Co urt unpe rsua de d:
• “the e vide nc e no w sug g e sts tha t inte rna l e q uity wa s suc h a n

impo rta nt a spe c t o f De fe nd a nts’ c o mpe nsa tio n pra c tic e s tha t: (1) De fe nd a nts utilize d so ftwa re to o ls to g e ne ra te inte rna l e q uity re po rts a nd to c o mp a re e a c h e mplo ye e to his o r he r pe e rs; (2) De fe nd a nts a dvise d ma na g e rs tha t inte rna l e q uity wa s a prime c o nside ra tio n whe n se tting a nd a djusting sa la rie s; a nd (3) De fe nd a nts a c tive ly mo nito re d the ir c o mpe nsa tio n struc ture to ide ntify disc re pa nc ie s within a nd b e yo nd jo b title s a nd g ro ups a nd to ma ke a djustme nts a s ne c e ssa ry”

• Class Ce rt Orde r a t 66.

40

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• More De fe nda nt Critique s
• L

e a me r’ s c o rre la tio n a nd re g re ssio n a na lyse s impro pe rly re ly o n a ve ra g e c o mpe nsa tio n fo r jo b title s

• “[b ]y a ve ra g ing the c o mpe nsa tio n o f a ll e mplo ye e s who ho ld

the sa me jo b title …[Dr. L e a me r] ne c e ssa rily wipe s o ut the ve ry thing he is suppo se d to b e me a suring —the sig nific a nt va ria tio n in individua l e mplo ye e s’ c o mpe nsa tio n.” - Suppl. Opp’ n a t 5

• Re je c te d a g a in:
• Ave ra g ing do e s no t ma sk va ria tio n a c ro ss jo b title s (o nly within)
• Co mmo n fa c to rs a na lysis (no n-a ve ra g e d, e mplo ye e -spe c ific ),

sho ws 90% o f va ria tio n e xpla ine d b y c o mmo n fa c to rs (mo stly jo b title ) Class Ce rt Orde r a t 71 – 72

41

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Mor

e De fe ndant Cr itique s

• Re g re ssio ns suffe r fro m e ndo g e ne ity pro b le m: An
• mitte d va ria b le c o rre la te d with b o th
• Jo b title c o mpe nsa tio n
• F

irm-wide a ve ra g e c o mpe nsa tio n (L e a me r’ s ke y inde pe nde nt va ria b le )

• Re je c te d b y Co urt fo r la c k o f spe c ific ity:
• De fe nda nts fa ile d to ide ntify a ny o mitte d va ria b le
• F

a ile d to e xpla in/ sho w ho w inc luding the o mitte d va ria b le wo uld a lte r L e a me r’ s re sults

42

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Mor

e De fe ndant Cr itique s

• Sta tistic a l e vide nc e is no t pro o f o f c a usa tio n; fa ils to

sho w tha t “c o mpe nsa tio n fo r c la ss me mb e rs wa s so rig idly inte rlinke d tha t a wa g e inc re a se fo r so me wo uld c a use a wa g e inc re a se fo r sub sta ntia lly a ll.”

• Suppl. Opp’ n a t 14
• Re je c te d b y Co urt in lig ht o f do c ume nts:
• “T

he Co urt finds pe rsua sive Dr. L e a me r’ s sta te me nt tha t e c o no mists ‘ a na lyze c o rre la tio ns, whic h a re ro utine ly use d…to dra w c a usa l c o nc lusio ns whe n suppo rte d b y c o mpe lling fra me wo rks a nd c o mple me nta ry info rma tio n.’ ” – Class Ce rt Orde r a t 75.

43

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• 1st Daube r

t Challe nge

• De fe nse : L

e a me r’ s (o rig ina l) c o nduc t re g re ssio n sho uld ha ve utilize d “c luste re d sta nda rd e rro rs”

• With this c o rre c tio n, c o nduc t va ria b le no t

sta tistic a lly sig nific a nt a t c o nve ntio na l le ve ls (1%, 5%, 10%)

• “Null hypo the sis” Co mpe nsa tio n una ffe c te d b y c o nduc t;
• I

f true , L e a me r’ s e stima te s wo uld still o c c ur mo re tha n 10%

• f the time due to ra ndo m c ha nc e
• L

e a me r una b le to e stima te c o nduc t c o e ffic ie nts “with suffic ie ntly re a so na b le pre c isio n to c o nc lude the ir true va lue — o r the impa c t o f the c ha lle ng e d a g re e me nts — is diffe re nt fro m ze ro .” - L e ame r Mo t. at 7

44

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• 1st Daube r

t Challe nge

• While a c kno wle dg ing “a mple e vide nc e ” tha t the se

thre e le ve ls a re c o nve ntio na l a mo ng sta tistic ia ns, Co urt fo und issue g o e s to we ig ht, no t a dmissib ility

• Sc ho la rly/ e xpe rt e vide nc e tha t c o nve ntio na l sig nific a nc e

le ve ls “sho uld no t b e b lindly a pplie d in e ve ry c a se ”

• L

a c k o f pre c e de nt: “De fe nda nts ha ve no t c ite d, no r ha s this Co urt fo und, a ny c a se ho lding tha t a re g re ssio n mo de l must re je c t a null hypo the sis o f ze ro e ffe c t a t le a st a t the 10% sig nific a nc e le ve l in o rde r to b e a dmissib le .”

45

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• 1st Daube r

t Challe nge

• No thing ma g ic a l a b o ut c o nve ntio na l thre sho lds
• T

ra de o ff: De c re a se alpha (c ha nc e o f T ype I E rro r) I nc re a se b e ta (c ha nc e o f T ype I I E rro r)

46

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• 2nd Daube r

t Challe nge

• Co nduc t re g re ssio n c a nno t disting uish e ffe c t o f Cha lle ng e d

Co nduc t fro m o the r unila te ra l c o nduc t a g re e me nts

• (“T
• the e xte nt tha t the se [o the r c o ld-c a lling re stric tio ns] a re

c o inc ide nt in time with . . . the se [c ha lle ng e d] b ila te ra l a g re e me nts the y ha d, a nd to the e xte nt tha t the y suppre ss wa g e s during tha t pe rio d o f time , it’ s g o ing to b e pic ke d up b y the c o nduc t va ria b le [.]”)

• L

e ame r De p. At 340

• Re je c te d:
• “the ra tio na le unde rlying De fe nda nts’ a rg ume nt—tha t Co mc ast ho lds

tha t a da ma g e s mo de l must pre c ise ly se g re g a te o ut e ffe c ts o f e ve ry po ssib le fa c to r, inc luding le g a l c o nduc t, tha t c o uld impa c t the de pe nde nt va ria b le , in o rde r to b e a dmissib le unde r Da ub e rt—dire c tly c o ntra ve ne s we ll e sta b lishe d Supre me Co urt a nd Ninth Circ uit a utho rity ho lding tha t da ma g e s in a ntitrust c a se s o fte n c a nno t, a nd the re fo re ne e d no t, b e pro ve n with e xa c t c e rta inty.” – Orde r Re : Mo tio n to E xc lude at 33

47

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• 3rd Daube r

t Challe nge

• L

e a me r inc lude s “to ta l ne w hire s” in Co nduc t Re g re ssio n to c o ntro l fo r o ve ra ll la b o r de ma nd a c ro ss a ll De fe nda nts; De fe nse a g ue s inc o nsiste nt with the o ry o f ha rm; sho uld b e e xc lude d pe r Co mc ast

• Co urt unc o nvinc e d:
• “De fe nda nts ha ve fa ile d to e xpla in, b o th in the ir b rie fing

a nd a t the he a ring , why a nd ho w Dr. L e a me r’ s inc lusio n o f a n a g g re g a te d to ta l ne w hire s va ria b le in his mo de l me a ns his mo de l is “inc o nsiste nt” with this a lle g e dly lo g ic a l implic a tio n o f Pla intiffs’ the o ry.”

48

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• 4th Daube r

t Challe nge

• “Dr. L

e a me r c a nno t re ly o n his c o nduc t re g re ssio n to e sta b lish the e xiste nc e o f c la sswide impa c t whe n he a dmits the mo de l is inc a pa b le o f sho wing tha t e a c h c la ss me mb e r wa s injure d.”

• Re je c te d; misc ha ra c te riza tio n:
• “De fe nda nts’ a rg ume nt fa ils b e c a use the ir ma in b a sis fo r

e xc lusio n hing e s o n a misle a ding c ha ra c te riza tio n o f Dr. L e a me r’ s o pinio n re g a rding impa c t.”\

• Co nduc t Re g re ssio n de sig ne d to sho w g e ne ra l e ffe c ts
• One pa rt o f two -ste p pro o f

49

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• T

a ke a wa ys

• Mo no pso ny c la ims ma y b e fo und a me na b le to c o mmo n

pro o f, e ve n w/ o e xplic it wa g e -fixing

• Pla intiffs c a n e xplo it da ta -ric h e nviro nme nt to sho w (1)
• ve ra ll e ffe c ts; (2) pric ing struc ture
• Ma y b e a mista ke fo r De fe nse to re ly to o he a vily o n

g e ne ra l me tho do lo g ic a l c ritiq ue s

• Sig nific a nc e le ve ls, c luste re d sta nda rd e rro rs a nd the like c a n

b e a rg ue d fro m e ithe r side

• Va g ue c la ims o f e ndo g e ne ity ine ffe c tua l
• Qua lita tive ta le s o f individua lize d c o mpe nsa tio n struc ture s ma y

no t de fe a t da ta a na lyse s & c o nte mpo ra ne o us do c ume nts

50

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Alte r

native De fe nse Str ate gie s

• Use b e nc hma rking to unde rmine first pro ng o f

impa c t pro o f (b e fo re -a fte r a na lysis)

• Pla intiffs the o ry implie s hig h-te c h sa la rie s &

e mplo yme nt suppre sse d in re le va nt la b o r ma rke t

• Co mpa re pa y & hiring a t De fe nda nts with tho se in

c o ntro l ma rke t

• Othe r c o untrie s? Othe r industrie s?
• F

inding tha t e ithe r b e nc hma rk mo ve d in wro ng dire c tio n wo uld unde rmine Pla intiffs 1st pro ng o f impa c t pro o f

• E

ve n witho ut a c o ntro l g ro up, L e a me r’ s b e fo re -a fte r mo de l c o uld b e mo difie d suc h tha t e mplo yme nt is the de pe nde nt va ria b le

• Did De fe nda nts’ pa c e o f hiring rise o r fa ll a fte r jo ining a lle g e d

c o nspira c y?

• Ab se nc e o f o utput e ffe c t  Ab se nc e o f ha rm

51

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Alte rna tive De fe nse Stra te g ie s
• L

e a me r’ s ke y re la tio nship: Ave ra g e jo b -title c o mpe nsa tio n “e xpla ine d” b y firm a ve ra g e

• Po int o ut tha t the “inde pe nde nt” va ria b le (firm a ve ra g e ) is

e ndo g e no us b y c o nstruc tio n

• T
• ide ntify o mitte d va ria b le s, a sk De fe nda nts fo r

c o nte mpo ra ne o us e vide nc e o n drive rs o f jo b -title fluc tua tio ns in c o mpe nsa tio n during the Cla ss Pe rio d (a nd he nc e the firm- wide a ve ra g e )

• Sure ly a lle g e d c o nspira c y do e s no t e xpla in e ve rything
• T

he mo re o mitte d va ria b le s a re a dde d to re g re ssio n, the le ss mo re like ly L e a me r’ s ke y re la tio nship will we a ke n o r disa ppe a r

• We a ke ns o r e limina te s pro o f o f rig id pric ing struc ture

52

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Alte r

native De fe nse Str ate gie s

• Use se nsitivity a na lysis to b o lste r e mpiric a l re le va nc e o f

e ndo de ne ity pro b le m

• Sta nda rd e c o no me tric s: E

ndo g e ne ity in e ve n o ne inde pe nde nt va ria b le g e ne ra lly c o nta mina te s e stima te s fo r a ll

• the r inde pe nde nt va ria b le s with whic h it is c o rre la te d
• Ho lds whe ne ve r inde pe nde nt va ria b le s a re c o rre la te d
• By inte ra c ting firm-wide a ve ra g e s with o the r c o ntro l va ria b le s,

L e a me r multiplie s po te ntia l fo r a c o mple x & pe rva sive we b o f b ia s in his e stima te s – inc luding e ffe c t o f c o nduc t

• Se nsitivity a na lysis c a n re ve a l se ve rity o f b ia s, g ive n pla usib le

a ssumptio ns o n the de g re e o f c o rre la tio n b e twe e n o b se rve d a nd uno b se rve d drive rs o f c o mpe nsa tio n

• Ag a in, unde rmine s 2nd pro ng o f Pla intiffs’ pro o f

53

IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIG

• Alte r

native De fe nse Str ate gie s

• Sho w L

e a me r’ s c o nc lusio ns fa il unde r mo re rig o ro us e mpiric a l a ppro a c h to a sse ssing impa c t

• Ca ve s & Sing e r (2014): Be fo re / a fte r a ppro a c h c a n

b e ma de spe c ific to jo b c a te g o ry, o r individua l c la ss me mb e r

54