Page 98 - Economic Damages Calculation

Appendix of Other Cases

Other Cases on Causation

Iams Co. v. Nutro Prods., 2004 U.S. Dist. LEXIS 31141 (S.D. Ohio June 30, 2004)

In a Lanham Act case involving allegations of false or misleading advertising that purportedly caused
consumers to switch from the plaintiff's dog food to the defendant's dog food, the plaintiff engaged a
damage and causation expert who prepared a multiple regression analysis, which the court found had
failed to adequately prove causation.

The central issue in this case involved revisions to the defendant’s feeding guidelines, which instructed
consumers to use a reduced portion of dry dog food when feeding adult dogs. The plaintiff’s expert testi-
fied that the logical economic result of these revised feeding guidelines, which the plaintiff alleged con-
stituted false advertising, was that consumers (a) would perceive a reduction in feeding guidelines to
equal a reduction in price, and (b) would lead consumers to switch from the plaintiff’s dog food to the
defendant’s dog food.

In reaching these conclusions, the plaintiff’s expert constructed a regression analysis predicated on the
assumption that the purportedly false advertising would impact sales of the plaintiff’s adult dry dog food
only and would have no impact on its other products — such as puppy food, adult cat food, or kitten
food. Using a ratio of adult dry dog food sales to sales of one of these other pet food products as his de-
pendent variable, the plaintiff’s expert testified that he effectively eliminated any other factors in the
marketplace that could have impacted sales. The plaintiff's expert reasoned that changes in the feeding
guidelines would have presumably impacted only the sales of dry adult dog food while other broader
market factors would have impacted both the dry adult dog food as well as the defendant’s other pet
food products.

The court, however, rejected this assumption due to (1) lack of foundation in the economic literature for
the use of this ratio; (2) lack of stability in the ratio based upon the defendant’s sales history, which
made it unreliable; and (3) testimony contradicting the reliability of this assumption by the plaintiff’s
chief operating officer, who testified that changes in the defendant’s feeding guidelines had an adverse
impact on all of the plaintiff’s product lines — not just its adult dry dog food.

The court was also critical of the plaintiff’s expert’s regression analysis for other reasons, including the
following:

a. While the court suggested that it may have been logical that a reduction in feeding guidelines
could have been perceived by consumers as a reduction in price, no analysis was presented by
the plaintiff’s expert to support this assumption.

b. The plaintiff’s expert failed to examine the cross-elasticity of demand between the plaintiff’s dry
adult dog food and the defendant’s dry adult dog food. This analysis would have measured how
reductions in the price of the defendant’s dog food would have led to a switch from the plain-
tiff’s product to the defendant’s product by those consumers looking to change brands as a result
of the purported price reduction.

While the assumptions are "logical" in that it is logical to assume that people are economically rational,
substituting less-expensive goods for more expensive goods of the same kind, mere logical assumptions
do not provide a scientific basis for [the plaintiff’s expert’s] conclusion that [the plaintiff] was damaged.

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