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PUBLIC 

08 13 2012 

UNITED STATES OF AMERICA
	

BEFORE THE FEDERAL TRADE COMMISSION
	

OFFICE OF ADMINISTRATIVE LAW JUDGES
	

) 

In the Matter of ) PUBLIC 

) 

MCWANE, INC., )

 a corporation, and ) 

STAR PIPE PRODUCTS, LTD., )

 a limited partnership. ) DOCKET NO. 9351 

) 

__________________________________ ) 

RESPONDENT’S OPPOSITION TO COMPLAINT COUNSEL’S MOTION IN LIMINE 

TO EXCLUDE CERTAIN OPINIONS AND PRICE ANALYSES IN DR. PARKER 

NORMANN’S EXPERT REPORT 

Complaint Counsel (“CC”) does not challenge Dr. Normann’s expertise or his 

qualifications to testify as an economist, which are based on his PhD in economics and more 

than 15-years of experience analyzing and empirically testing a wide range of antitrust economic 

issues. Nor does CC challenge the vast majority of his analyses and opinions. For example, CC 

raises no issue with Dr. Normann’s opinions based on volume tonnage data or other non-price 

business records, which encompass Figures 1, 5, 6, 7, 8, 11, 12, 13, 14, 15, 16, 19, 20, 21, 22, 25, 

26, and 32. 

Instead, CC narrowly challenges only opinions based on Dr. Normann’s invoice price 

analyses which are contained in Figures 2A, 2B, 3, 4, 9-10, 23, 24, and 28-31. Those analyses - -

which show that McWane’s prices declined during the alleged conspiracy period (Figure 2A) 

and were not parallel with Sigma or Star’s prices (Figure 2B), that job pricing continued 

throughout the alleged conspiracy (Figure 4), that Star sold in its first 

year with domestic fittings, and that 

 after Star’s expansion into domestic (Figures 27-31) - - are based on 

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invoice prices that McWane, Sigma, and Star kept in the ordinary course and relied on to run 

their businesses. 

Dr. Normann and his team thoroughly investigated the data which contains millions of 

discrete pieces of information, including invoice prices, SKUs, quantities, dates, and ship-to 

locations. Dr. Normann found anomalies in a very (e.g., blank 

data fields or typos). He and his team thoroughly compared 

those anomalies to surrounding non-anomalous data and satisfied themselves that the anomalies 

understandable and reliable. Dr. Normann also satisfied himself that the data was sufficiently 

were explainable on their face (e.g., decimal point out of place) or could be properly interpreted 

using the kinds of reasonable assumptions economists routinely use in assessing complex 

databases. Dr. Normann thus found that more than 99% of the data at issue was entirely 

robust because he ran the same tests with and without the tiny fractional percentage of 

anomalies - - and saw the same results. 

CC argues that the small incidences of anomalies in the McWane database renders all of 

the data from McWane, Sigma and Star - - despite the fact that they relied upon it for 

the last decade to conduct their businesses. That is preposterous. CC’s assertion is entirely 

based on their own expert, Dr. Schumann’s, new-found claim in his Rebuttal Report 

. Indeed, Dr. Schumann conceded that his affirmative Report - -

which contained all of his affirmative conclusions - - raised no critique of the data at all. 

 He also conceded he was not personally involved 

and spent “not very much time at all” analyzing and trying to understand the data.1 

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CC’s remaining critique - -

- - simply mischaracterizes Dr. Normann’s methodology. Dr. 

Normann’s tests controlled for exogenous factors when there was a need to control for them. 

When there was not a need to control for exogenous factors, he did not. For example, to test the 

hypotheses set out in the Complaint (¶¶ 32-34) that the January and June 2008 multipliers were 

“price increases” that were “the result of a combination and conspiracy” by which Star and 

Sigma “limit[ed] their discounting from public price levels in order to induce McWane to 

support higher price levels,” Dr. Normann studied the January and June 2008 multipliers and the 

invoice data (which reflects discounts below the multiplier discounts) - - the very price decisions 

allegedly at issue - - and found evidence that conclusively disproved the hypotheses on its face 

(without any need to control for outside factors): 

Dr. Normann’s opinions and price analyses readily satisfy the Fed. R. Evid. 702 and 

Daubert requirements. He is indisputably qualified, and carefully and thoughtfully applied a 

reliable methodology to reliable data that was used by the parties in the ordinary course of 

2

 Any further post-invoice price concessions (such as rebates) are immaterial because the Complaint does not allege 

an agreement to reduce those concessions. The Complaint only alleges an agreement to limit job discounts, which 

are reflected on the invoice. 

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running their businesses over the last decade. CC’s assertions to the contrary, based entirely on 

its own expert’s after-the-fact, minor critique, are pure fiction.3 

FACTUAL BACKGROUND 

I. Dr. Normann Used Reliable Data 

The transactional data Dr. Normann and his team analyzed is the same data that has been 

used by McWane, Star and Sigma in the ordinary course of their businesses for the past decade. 

The invoice level data contained literally millions of entries, and only a very

 contained any anomalies. Dr. Normann and his staff conducted 

numerous robustness checks of the data and results, including re-running the analysis excluding 

the small fraction of potentially anomalous data entries, and found that even removing all of 

those transactions did not affect his analyses or conclusions. 

Dr. Normann found that after additional study and testing, the vast majority of the small 

fraction of anomalous data entries were explainable on their face. Specifically, Dr. Schumann 

incorrectly considers any transaction where the actual multiplier exceeds the published multiplier 

an error. However, the vast majority of the transactions in 

McWane’s data set have a calculated (or actual) multiplier either at the published multiplier, or 

consistent with job price discounting. Dr. Normann and his team identified and further studied 

3

 Indeed, CC did not affirmatively reach out to counsel for McWane to conduct meet and confer regarding Dr. 

Normann’s price analyses, and only raised the issue as a tit-for-tat when McWane called to confer on its motion to 

exclude Dr. Schumann. 

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this low number of potentially suspect transactions and found that the actual transaction prices 

were sound. 

With respect to the pricing data (used in Figures 2A, 2B, 3-4, 9-10, 23-24, 28-31, and 

opinions based on them) that CC characterizes as containing the vast 

majority of the transactions studied are attributable to data that was objectively not problematic. 

For each of these figures, between 99% and 100% of the volume can be attributed to undisputed 

transactions; and even potentially problematic transactions are limited to a small number of 

transactions in McWane’s price series only (Star and Sigma’s data were not affected), thus 

making any anomalies immaterial. 

This low number of even potentially suspect transactions is well below a 

threshold required to justify the discarding of all the data produced in this litigation. 

II. Dr. Normann Controlled For The Factors Necessary To Conduct His Analysis 

Where relevant, Dr. Normann controlled for factors that impacted prices his graphs on a 

number of his figures, and when he did not attempt to control for any factors, it was not 

necessary. For example, for Figures 2A, 2B, 3 and 4, Dr. Normann controlled for both product 

mix and timing. For figure 6 the series are indexed and overlapped to control for seasonality.5 

4

 Notably, Dr. Schumann uses these same fields in his own report. 

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As explained in further detail in his declaration, it was not necessary to control for factors 

beyond what he controlled for. 

Finally, no controls were necessary for Figures 7, 8, 12, 16, and 21-31. (Ex. 3, at ¶¶14-

15.) CC’s allegations focused on “price increases” in January and June 2008 that were “the 

result of a combination and conspiracy” by which Star and Sigma “limit[ed] their discounting 

from public price levels in order to induce McWane to support higher price levels” - - i.e., an 

alleged agreement to increase multipliers and to increase invoice prices by limiting invoicelevel job discounts. (Compl. at ¶¶ 32-34.) Both allegations are measureable by analyzing the 

data. Thus, there was no need to control for additional factors because the data on its face 

disproves the hypothesis that McWane increased multipliers and invoice job prices, and that it 

did so in conjunction with Sigma and Star. 

Indeed, Dr. Normann’s key price graphs and conclusions are corroborated by 

contemporaneous documents and testimony - - and, often, by CC’s own expert. 

Dr. Normann’s Figure 4 shows that 

McWane’s invoice job price discounts continued throughout 2008 and do not move in parallel 

with Star or Sigma. That is entirely consistent with independent decision-making and the 250-

plus sworn denials of any conspiracy in this case - - and entirely consistent with 

and 

his inability to define in any fashion any agreement to reduce either the incidences or the amount 

of job discounts. 

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ARGUMENT
	

Pursuant to Federal Rule of Evidence 702 and relevant case law, a court should be able to 

obtain the benefit of an expert’s opinion so long as (1) the expert is qualified; (2) the expert’s 

opinion is based on reliable methods and principles; and (3) the expert’s methods fit the facts of 

the case. Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 579-80 (1993). Dr. Normann 

easily meets the standards of Rule 702 and Daubert. He is indisputably qualified by education, 

training, and experience to testify as an expert in this matter, and quibbles over his assumptions 

regarding a small fraction of anomalous data entries in a very large amount of data is not a 

proper reason to exclude his expert opinion. Fisher v. Ciba Specialty Chemicals Corp., 2007 

WL 2302470 at *15 fn.31 (S.D. Ala. 2007) (“To the extent that [parties] now quibble with the 

accuracy of the living history data . . . the remedy is not to throw out [expert] testimony in its 

entirety as unreliable under Daubert”); Cook v. Rockwell Intern. Corp., 580 F.Supp.2d 1071, 

1092 (D. Colo. 2006) (disputes over the reliability of data set was “a classic disagreement 

between experts that goes to the credibility of each expert’s opinions, not to the reliability of 

their methodology within the meaning of Rule 702.”). 

“Vigorous cross-examination [and] presentation of contrary evidence” are the traditional 

and appropriate means of attacking the evidence upon which a qualified expert bases his 

opinions. Daubert, 509 U.S. at 595; Oddi v. Ford Motor Co., 234 F.3d 136, 145 (3d Cir. 2000) 

(“The test of admissibility . . . is whether the particular opinion is based on valid reasoning and 

reliable methodology. The analysis of the conclusions themselves is for the trier of fact when the 

expert is subjected to cross-examination.”). “Rule 702 embodies three distinct substantive 

restrictions on the admission of expert testimony: qualifications, reliability and fit.” Elcock v. 

Kmart Corp., 233 F.3d 734, 741 (3d Cir. 2000). Exclusion, in contrast, is based for the situations 

when - - as with Dr. Schumann’s opinion in this matter - - the expert’s opinion is nothing more 

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and often lower than Sigma’s and Star’s; (2) McWane’s invoice-level job discounts continued in 

2008; (3) McWane’s declining invoice prices moved in different directions from those of Sigma 

than his “wholly unsupported and speculative” belief. City of Moundridge v. Exxon Mobil Corp., 

No. 04-940, 2009 U.S. Dist. LEXIS 123954, at * 39 (D. D.C. Sept. 30, 2009), aff’d, 409 Fed. 

Appx. 362, 364 (D. C. Cir. 2011). 

The price data Dr. Normann analyzed was reliable and sufficiently robust to test the 

hypotheses raised in the Complaint. Dr. Normann’s opinion is thus sound in concluding that: 

(1) McWane’s published multiplier price changes in January or June of 2008 were different from 

and Star; (4) there is no economic evidence for an agreement to reduce job pricing; (5) 

McWane’s rebate policy was not exclusionary, as Star was able to quickly enter the domestic 

fitting segment; and (6) McWane’s average domestic fittings invoice prices were at all times 

lower than Star’s. 

The invoice job price data from McWane, Star and Sigma was fully reliable and 

sufficiently robust to support Dr. Normann’s conclusion that the data directly contradicts the 

Complaint’s allegations. CC’s critique - - when its own expert did not raise any concern at all 

with the data in his affirmative Report and conceded that he spent little or no time investigating 

 he says might be of concern - - rings hollow. The fact that the results 

of each of Dr. Normann’s extensive tests are consistent with undisputed testimony and other 

record evidence in this case (and, often, with the view of CC’s own expert) further confirms the 

reliability of Dr. Normann’s analyses and the validity of his resulting opinion. Thus, any dispute 

over the data Dr. Normann relied on or the factors he controlled for, is an issue for the trier of 

fact and not proper grounds for a Daubert motion. 

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/s/ J. Alan Truitt 

J. Alan Truitt 

Thomas W. Thagard III 

Maynard Cooper and Gale PC 

1901 Sixth Avenue North 

2400 Regions Harbert Plaza 

Birmingham, AL 35203 

Phone: 205.254.1000 

Fax: 205.254.1999 

atruitt@maynardcooper.com 

tthagard@maynardcooper.com 

Dated: August 13, 2012 

__/s/ Joseph A. Ostoyich_____ 

Joseph A. Ostoyich 

William Lavery 

Baker Botts L.L.P. 

The Warner 

1299 Pennsylvania Ave., N.W. 

Washington, D.C. 20004-2420 

Phone: 202.639.7700 

Fax: 202.639.7890 

joseph.ostoyich@bakerbotts.com 

william.lavery@bakerbotts.com 

Attorneys for Respondent McWane, Inc 

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PUBLIC 

CERTIFICATE OF SERVICE 

I hereby certify that on August 13, 2012, I filed the foregoing document electronically 

using the FTC’s E-Filing System, which will send notification of such filing to: 

Donald S. Clark 

Secretary 

Federal Trade Commission 

600 Pennsylvania Ave., NW, Rm. H-113 

Washington, DC 20580 

I also certify that I delivered via overnight delivery a copy of the foregoing document to: 

The Honorable D. Michael Chappell 

Administrative Law Judge 

Federal Trade Commission 

600 Pennsylvania Ave., NW, Rm. H-110 

Washington, DC 20580 

I further certify that I delivered via electronic mail a copy of the foregoing document to: 

Edward Hassi, Esq. 

Geoffrey M. Green, Esq. 

Linda Holleran, Esq. 

Thomas H. Brock, Esq. 

Michael L. Bloom, Esq. 

Jeanine K. Balbach, Esq. 

J. Alexander Ansaldo, Esq. 

Andrew K. Mann, Esq. 

By: ______/s/ William C. Lavery_____

 William C. Lavery 

 Counsel for McWane, Inc. 

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EXHIBIT 1
	

This exhibit has been 

marked Confidential 

and redacted in its 

entirety
	
EXHIBIT 2
	

This exhibit has been 

marked Confidential 

and redacted in its 

entirety
	
EXHIBIT 3
	

This exhibit has been 

marked Confidential 

and redacted in its 

entirety
	
EXHIBIT 4
	

This exhibit has been 

marked Confidential 

and redacted in its 

entirety