Damages from Alleged Conspiracy
The Canadian Competition Bureau, through the federal prosecution service, initiated criminal price fixing charges on more than a dozen companies and three dozen individuals relating to an alleged price fixing scheme in a handful of Canadian retail gasoline markets. It was alleged that gasoline station operators and managers called one another by telephone and coordinated price increases to the detriment of purchasers. Canadian law at the time of the alleged infraction required both proof of a conspiracy and proof that the alleged conspiracy was successful in substantially lessening competition. An expert report commissioned by the Bureau purported to show economic evidence of the existence of a conspiracy (using pricing data alone) and estimated damages in the tens of millions of dollars. The report had been submitted in earlier criminal cases in the same matter, which ended with criminal convictions.
Dr. Noel was retained by a major retailer indicted in the matter to review the report submitted by the Bureau's expert, evaluate its methodology, and evaluate the reliability of its conclusions. Dr. Noel showed that the report was fatally flawed in numerous respects. Dr. Noel showed that gasoline price movements during the alleged conspiracy period were as consistent with competition as they were with collusion, and that the report's central claim (that one can identify a conspiracy on the basis of price data alone by searching for periods of parallel and higher-than-average pricing) was without economic basis.
Dr. Noel showed that the opposing expert's damages calculations, even under the assumption of conspiracy, was also grossly inflated. Dr. Noel found numerous examples in the report of a practice known as "cherry-picking", in which data and analyses that would appear to support higher damages were highlighted while equally relevant data and analyses that supported lower or no damages were disregarded. Most notably, the report discarded up to half of all price data during the alleged conspiracy period whenever that data contained lower prices than the report's competitive benchmark prices, contradicting the report's central claims. Dr. Noel showed that, absent the practice of cherry-picking, the expert's own methodology actually showed no damages and no evidence of a substantial lessening of competition.
To that point in time, prosecutors had successfully prosecuted several dozen defendants on criminal price fixing charges relating to the alleged conspiracy. Fines were as high as 1.8 million dollars and imprisonment terms were as long as eighteen months. However, shortly after the summary of Dr. Noel's report was presented to prosecutors, enumerating the flaws in the opposing expert's report and showing no discernible price increase during the alleged conspiracy period, prosecutors dropped the criminal charges against the defendant and settled the matter out of court with no criminal charges. It was the first case in the matter that did not end with a guilty plea or verdict for criminal price fixing.