WATER WAR: Anti-trust Expert Testifies for Fairfax Water

By GEORGE BROMLEY
Falls Church Times Staff

February 3, 2010

The third day of trial in Fairfax Circuit Court saw the introduction of the plaintiff’s star witness, economist John W. Mayo.

In response to questions from Fairfax Water counsel Stuart Raphael, Dr. Mayo stated his opinion that Falls Church possesses monopoly power in the relevant market (i.e., eastern portions of Fairfax County) and has engaged in actions to maintain and prolong such power.  He characterized his finding as ”not a close call.” 

The witness termed the City’s maintaining an exclusive service area ”cheap exclusion”, both in that the tactic is inexpensive, as opposed to predatory pricing, which has substantial monetary costs, and in the sense that it has no redeeming features.  He saw no economic efficiency or utility-based (i.e., technical) resaon in Falls Church’s use of easements to force developers to connect to its system.        

Dr. Mayo then faced extensive and intensive cross-examination from defense counsel Sandy Thomas on the nature of Fairfax Water’s competition with Falls Church, which the witness defined as “nascent.”  Dr. Mayo took the positon that the market will become more competitive over time once the City’s monopoly ends and that benefits gradually will accrue.  However, counsel built an effective case that the utility is not in true competition with the City’s system. 

Mr. Thomas quoted a 30 year Fairfax Water employee as stating that he never had considered his utility as being competitive with Falls Church.  Counsel also pointed out that a senior manager had stated the company never takes into consideration what other utilities charge for various services.                

Dr. Mayo, a professor at the McDonough School of Business at Georgetown University, was still on the witness stand at the end of today’s session.  His expert report, which served as the basis for much of his testimony, is available here.

The trial will resume tomorrow at 10:00.   Court will be in recess Friday and convene again on Monday morning, weather permitting.