One notable opportunity associated with antitrust class action practice is the expert “hot tub,” which generally speaking is an in-court, on-the-record “debate” between dueling economists, with the court, parties, and experts themselves (or some variation thereof) participating in questioning. Such proceedings are different from a traditional Daubert hearing, which involves questions from the attorneys and perhaps the district judge, but not direct questioning of one side’s expert by the other. While rare, sometimes a “hot tub” can make or break a case.
That is what just happened in the massive Google Play Store litigation, a challenge on behalf of a class of more than 21 million Android users who purchased apps through the Google Play Store. The consumers claim that restrictions imposed by Google on app developers have allowed Google to maintain a monopoly over Android app distribution, violating section 2 of the Sherman Act and causing class members to pay supracompetitive prices, and suffer billions in damages.
In a remarkable twist, the Northern District of California has thrown out key opinions of the class’s merits expert, Dr. Singer, because his damages model was based on an implausible assumption: that app store consumers view apps categorized by Google in a certain manner, like “education,” “sports,” or “games,” as substitutes for one another, such that if the price of one app increases consumers will look to other products in the same category, and will do so in a manner proportionate to each app’s share of the category. According to the court, this critical assumption, on which Singer’s calculations of over $7 billion in damages depended, was groundless.
The development is stunning because about nine months ago, following the case’s first hot tub, the court certified a class of more than 21 million Android users, finding the same Dr. Singer’s work, then in his role as class certification expert, to be reliable. At the time, an expert for Google, Dr. Burtis, criticized Singer’s work but did not persuade the court to deny class certification. In the court’s view, Singer’s damages model could reliably be used to estimate damages on a classwide basis.
At the merits stage, Google replaced Burtis with another economist, Dr. Leonard. Following a second hot tub, the court reversed course. Though the court had “misgivings” about giving Google another shot at Singer, with a pinch-hitting economist to boot, “ascertaining the truth” outweighed those concerns. This time, the court was persuaded that the product substitution patterns Singer assumed were implausible. Pointing to Leonard’s critique at the second hot tub, the court agreed that Google’s “categories” — which are self-selected by app developers — did not reflect real-life substitution patterns among users. For example, Leonard noted that the apps Rosetta Stone, Duolingo, and PictureThis are all in the Play Store’s “education” category. Rosetta Stone and Duolingo are used to learn foreign languages, while PictureThis allows one to identify plants by photographing them. Of the three, Rosetta Stone has the highest share of the category, followed by PictureThis, then Duolingo. Under Singer’s model, Rosetta Stone customers are more likely to switch to PictureThis than to Duolingo if Rosetta Stone’s prices rise, which does not make sense, since Duolingo is far closer in kind to Rosetta Stone than is PictureThis.
The bad news for the class didn’t stop there. The court, reflecting on its decision to allow Singer’s opinions, and the same damages model, to go forward at class, issued a second order stating that if its class certification order were “still wholly before” the court, “the order granting certification” would be “vacated.” Class certification is not technically before the court because it allowed Google to take an interlocutory appeal to the Ninth Circuit, which now has jurisdiction.
The status of that appeal is now in flux. Based on the court’s new orders, it is more likely that the class will be the party filling the role of appellant in an eventual, overall appeal of the court’s orders on class and the merits, in a last-ditch effort to plug the holes in its rapidly leaking tub.
