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Simple English definitions for legal terms
yardstick theory
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A quick definition of yardstick theory:
The yardstick theory is a way to figure out how much money a company lost because of unfair competition. The company compares itself to another similar company that wasn't affected by the unfair competition. This helps them figure out how much money they would have made if the competition was fair. However, this method only works well if the companies and markets being compared are very similar.
A more thorough explanation:
The yardstick theory is a method used in antitrust cases to determine damages for lost profits or overcharges. It involves a corporate plaintiff identifying a company similar to them but without the impact of the antitrust violation.
For example, if a company was found to have engaged in anticompetitive behavior in the local market, the yardstick theory would involve finding a similar company in a different market where the anticompetitive behavior did not occur. By comparing the profits of the two companies, the plaintiff can estimate the damages they suffered as a result of the antitrust violation.
It's important to note that the yardstick theory only works well in markets that are relatively homogeneous and local. If the markets or firms being compared are too dissimilar, the estimate of lost profits may not be accurate.