Economic Analysis of Class Certification

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Richard Schmalensee, Jun 25, 2008

Economic analysis of class certification has a different focus than economic analysis of most antitrust issues or, indeed, most legal issues. Most economic analysis in support of litigation is concerned with averages or totals. To show that a practice is anticompetitive, for instance, one typically wants to show that it tends to increase market price, which is generally an average, or to decrease total output. But the focus in class certification is on differences: the commonality and typicality requirements for certification have to do with the relative importance of differences versus common elements within the asserted class. At the class certification stage, plaintiff wants to show that its basic theory of market-wide injury plus relevant evidence implies that all or almost all members of the asserted class are injured and that there is a formulaic way to measure the harm to each class member. In principle, defendant must take that basic theory as given and show, via theory or evidence, that it is consistent with an appreciable number of members of the alleged class not being injured or that the pattern of impacts is too complex to permit formulaic calculation of individual damages. In practice, of course, what one must or wants to take as given may not be clear-cut.

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