Brattle Principal Lisa Cameron, Academic Advisors Professor Greg Allenby and Professor Peter E. Rossi, and Brattle Senior Research Analyst Yikang Li recently co-authored an article for BNA about fundamental economic errors in approaches to damages in recent product mislabeling cases.
The article, “Computing Damages in Product Mislabeling Cases: Plaintiffs’ Mistaken Approach in Briseno v. Conagra,” critiques a hybrid method for calculating damages proposed in Briseno, a recent food mislabeling class action suit that has attracted widespread attention. In that case, a class of consumers sued Wesson for labeling its cooking oils “100% natural,” despite the fact that the oils contained genetically modified crops. Because the phrase “100% natural” contains multiple possible meanings, the plaintiffs proposed calculating damages with a two-step process. First, they would use a regression analysis based on historical data to determine how much consumers valued an all-natural label in general; then, they would break out the specific portion of that value attributable to the GMO-free interpretation of the label using a conjoint analysis that surveys consumers about their preferences.
The authors point out that this approach is unreliable in calculating damages, however, because it mixes information from two incompatible sources. Data about past prices reflect marketplace conditions of demand and supply. Consumer preferences, however, are based only on demand, and do not take into account market forces like costs, competitive conditions, and so on. In general, the authors conclude, damage estimates that rely on conjoint surveys must also take these other conditions into account; otherwise, they are economically suspect.
The article can be downloaded here.