NERA has been applying economic principles on behalf of clients around the world for half a century, providing analysis, expert testimony, and regulatory insight in complex litigation, regulation, and business situations. Our reputation for innovation and insight grounded in fundamental economics has made NERA the firm of choice for clients seeking solutions to high-stakes legal, regulatory, and market challenges. We bring together a thorough understanding of markets; a commitment to innovative application of economics, accounting, statistics, finance, and quantitative techniques; and a passion for finding the right answer.
Fifty years ago, we were the first to create a microeconomic consulting firm. Since our founding, NERA has grown and expanded in many ways. What began in 1961 as a small consultancy has evolved into a large, geographically diverse firm working with clients in 120 countries across dozens of industries. Yet through all of these changes, NERA has maintained its focus on economics. We are proud of our heritage and continue to help clients succeed by staying true to our core, founding principles: focus, independence, defensibility, and clarity.
Here is a look into the evolution of NERA, a firm that led its field 50 years ago and continues to do so today.
On 10 April 1961, Dr. Jules Joskow and Dr. Irwin Stelzer founded a new kind of company. The two noted economists, advised by Dr. Alfred E. Kahn (one of the country's foremost economists and future "father of airline deregulation"), created National Economic Research Associates, the first consulting firm dedicated to methodically applying rigorous microeconomic thought to litigation and regulatory matters.
With just 17 employees and two officers (Dr. Stelzer was president and Dr. Joskow was then vice president), what is today NERA Economic Consulting set up shop in New York City, with a satellite office in Washington, DC. The firm’s economists initially worked on projects including natural gas field pricing matters, particularly oil well-head price controls.
Since the clients who came to NERA for help included many major combination gas and electric utilities with regulatory problems that extended beyond gas costs, the firm’s first assignments led to work in the utilities industry involving testimony before state regulatory commissions and antitrust work in a growing range of industries. At the same time that NERA's work in electricity pricing was expanding, the Federal Communications Commission (FCC) initiated an investigation into AT&T's pricing policies. AT&T retained NERA to assist in developing the economic theory and the cost and market studies that would be required in hearings to be held on the matter. The project became the first of many that NERA tackled with AT&T on the issues they faced with the FCC, state commissions, and the Department of Justice over more than 20 years.
Within only a few years of the firm’s founding, NERA was branching into areas far beyond its initial natural gas litigation work. NERA experts took on antitrust work related to the television industry, and pioneered the application of discounted cash flow analysis in determining the appropriate rate of return in utility regulation. In 1968, the firm completed its first project related to securities. The New York Stock Exchange (NYSE) retained NERA to complete economic studies relating to the Securities and Exchange Commission (SEC)’s investigation into fixed commission rates for securities transactions. The project showcased NERA’s skills in financial economics and in handling large databases.
NERA’s work during its first decade proved to be a solid foundation for rapid growth during the 1970s. In 1971, the firm moved to larger offices in New York City to accommodate its growing staff of 65. Over the course of the decade, the Washington, DC office also expanded and NERA branched out to the West Coast, opening an office in Los Angeles in 1974.
Dramatic changes in energy markets and the deregulation of large sectors of the economy made the 1970s an exciting time. NERA’s economists, with their long history of involvement in energy, regulatory economics, and related fields, were deeply involved in these trends, advising both companies and a growing number of governments and regulators.
We performed groundbreaking work involving the Arab oil embargo and various government and private entities in the US energy sector, and expanded consulting in numerous industries contending with the economic shocks—and opportunities—the era presented. We took on work in communications, shipping, transportation, postal rate economics, airlines (including cases for TWA and Pan Am), consumer products, television and newspapers, and sports economics (most notably National Soccer League vs. NFL), to name a few. In 1972, the firm took on its first employment discrimination project with the AT&T vs. FCC case.
Energy was a central issue in the 1970s, and NERA was at the forefront of the industry’s transformation. NERA performed cost-benefit work for the Atomic Energy Commission that set the standard for analysis to be done in preparation for opening a new nuclear plant. In 1972, NERA took the initiative in addressing the lack of energy policy in the United States by helping to form the Energy Research Group (ERG), which brought together senior electric utility executives. The many reports and studies that NERA produced for the ERG provided the basis for public reports and for testimony before the US Congress, federal agencies, state regulatory bodies, and state legislatures. In the late 1970s, NERA worked with Congressional staff to draft what ultimately became the Public Utility Regulatory Policies Act (PURPA), which established a federally mandated policy with respect to the regulation of the electric utility industry.
NERA experts also worked on industry antitrust issues for a conglomeration of electric utility companies, as well as a significant number of Section 2 Sherman Act antitrust projects and several large M&A cases such as Mead/Occidental.
The firm’s growth in terms of staff, types of clients served, and kinds of work performed led NERA for the first time to formally establish practice areas, including antitrust, energy, and communications. Our antitrust experts also began working in the health care field, analyzing mergers involving hospitals, health insurers, pharmaceuticals, and medical device companies—and often providing support in related litigation. NERA’s prominence in antitrust led the firm to hold its first annual Antitrust Seminar in Aspen, Colorado, in July 1979. This seminar subsequently relocated to Santa Fe, New Mexico, and continues to bring together regulators, antitrust practitioners, and NERA economists.
The 1980s was a time of accelerating deregulation. NERA economists continued to conduct groundbreaking work in our traditional areas of expertise, but with a growing diversification of subject matter. The firm did important work on railroad deregulation, designing the regulatory regime for freight transportation. NERA was involved in several high-profile antitrust and competition policy cases, including the breakup of AT&T and a series of large cases for Southern California Edison. We also worked on a major case for the Major League Baseball Association to assist in arbitration of players’ salary awards, and undertook an important employment discrimination matter between the Department of Justice and United Telecommunications.
NERA’s work related to the 1978 Amoco Cadiz oil spill marked the first of several environmental matters that the firm undertook, primarily relating to damages to natural resources and cost/benefit studies on environmental pollution. These matters formed the basis for a practice group focused on environmental work.
The firm formally established its Securities and Finance Practice—today the largest securities practice among all economic consulting firms—in 1987. The practice got its start with a shareholder lawsuit against the New York electric utility LILCO, then quickly expanded. As in NERA’s other practices, the key to growth was innovation. By focusing on the expert use of econometric methods such as the event study, NERA experts could offer objective, quantitatively-based testimony in litigation. This approach was a sharp departure from the subjective testimony from industry participants that was prevalent in securities casework at the time.
With NERA at the forefront of regulatory economics, the spread of deregulation beyond the US in the 1980s naturally led the firm to enter global markets. NERA opened its first non-US office in London in 1984, largely to assist the UK government with matters related to privatization. NERA’s work on the privatization of the UK electricity industry was a groundbreaking assignment, one that proved that economists could be useful in previously unrealized ways. In 1989, the World Bank retained NERA for a project involving the restructuring of the Polish oil and gas pipeline market. These initial assignments assisting governments, utilities, and aid agencies throughout Europe in the transformation from state-run industry to regulated monopoly to competitive market became a worldwide line of business for the firm. In gaining exceptional international expertise, NERA’s economists also gained a global perspective that few others in the world could match.
The firm also expanded to other locations in the US, opening offices in Cambridge, Massachusetts (1984; moved to Boston in 2004), Philadelphia (1985), and San Francisco (1989). NERA also moved its office in New York City to White Plains, New York in 1983 to accommodate staff growth.
On 1 February 1983, NERA was acquired by Marsh & McClennan Companies (MMC). Dr. Jules Joskow was named NERA’s president in 1985, and he was succeeded by Dr. Richard (Dick) Rapp in 1988.
By the end of its third decade, NERA had a staff of 275 in 11 offices across North America and Europe and had become the world's only truly international economic consulting organization.
During the 1990s, NERA continued to expand and evolve. Several new practices were formed and the firm’s international expansion continued apace. By the late 1990s, NERA had grown to more than 400 members, including 300 consulting economists.
In the early 1990s, MMC asked NERA to assist some of their clients with forecasting DES (Diethylstilbestrol) and Agent Orange liabilities. The MMC projects formed the basis of what became NERA’s Mass Torts and Product Liability Practice. The practice was retained on a significant amount of work forecasting asbestos exposures, the first case of which was National Gypsum in 1992-1993. NERA was instrumental in resolving disputes.
Also during this time, experts within the firm saw the need for rigorous valuation techniques in the area of intellectual property (IP) litigation, where the then-common practice was to use experts simply to tell anecdotes about existing licenses for similar products. The case law began to demand a higher standard. In 1991, NERA published a series of papers on patent damages and evolution in the case law, and began offering services in this area across a wide range of industries—pharmaceuticals, medical devices, manufacturing, computer software and hardware, and many others. The mix of IP work broadened to include trademark disputes, trade secret and copyright disputes, and transfer pricing work. As time passed, NERA’s IP Practice grew to provide valuation advice outside the litigation arena. Today, NERA also does an increasing amount of survey work for trademark, copyright, and patent cases.
In the first part of the decade, NERA’s Securities and Finance Practice began publishing the first in a continuing series of closely followed reports on trends in shareholder class action litigation. Reflecting their growing numbers and influence in the firm, several women economists were key contributors early on to these studies. The number and seniority of women in the firm continue to differentiate NERA from many of its peers today.
In 1998, the Securities and Finance Practice inaugurated the Finance, Law & Economics Seminar, a two-day summer conference that brings together senior securities litigators, in-house counsel, regulators, and economists. Seminar sessions typically focus on recent trends in securities regulation, enforcement, and litigation, and other topical issues of the day.
Internationally, NERA continued to expand its presence. In 1990, the firm opened an office in Madrid, Spain, and in 1998 it opened an office in Sydney, Australia. In the US, NERA re-opened an office in New York City in 1990 and opened an office in Chicago in 1996.
As the US and world economy moved into a period of greater uncertainty in the 2000s, NERA's expertise and insight became even more critical in helping clients anticipate and manage the evolution of competition and regulation and the impact of likely developments on the profitability of a company or the economic evolution of a country. NERA also provided advice on strategic issues and risk management, and was one of the first companies within MMC to focus on the modeling of risk on an enterprise-wide basis.
NERA’s Securities and Finance Practice experienced tremendous growth, eventually working on a majority of the decade’s high-stakes and high-profile litigation matters—including Enron, WorldCom, United States vs. Martha Stewart and Peter Bacanovic, the Lyondell bankruptcy, and many, many others.
In 2002, the practice added additional expertise, including a group in the Washington, DC office, that gave the firm enhanced capabilities in connection with regulatory agencies and deep expertise in derivatives. These additions proved timely later in the decade with the upheaval in the credit markets and the collapse of the housing market in the US.
Also in 2002, NERA formally founded its Transfer Pricing Practice, which quickly expanded the number of regions and offices where its experts offered services and generated an increasing amount of business. Due to the cross-border nature of the work, the Transfer Pricing Practice led NERA into Japan, China, France, Germany, and Switzerland, and became a leading sector for the firm in terms of multinational engagements.
From 2007 through 2010, the firm did important and timely work in the areas of options backdating, subprime lending, auction-rate securities, structured products, Ponzi schemes, the impact of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform Act, bank litigation, and fraud detection. Our experts continue to be retained on matters in these areas in the US and internationally.
The sharp increase in the number of major asbestos bankruptcies after 2000 was also a key development for NERA; members of the Mass Torts and Product Liability Practice were involved in almost all of the major cases.
Other growth areas within the firm included the Environment Group, whose experts conducted important work on issues related to the Clean Water and Clean Air Acts in the US, utilities, climate change, emissions reduction, and emissions trading, particularly regarding cap-and-trade markets in the UK and Europe.
In its fourth decade, NERA completed projects in more than 100 countries. Regardless of where a project took place, the firm put together the best team for the task by calling on economic consultants from NERA offices around the world.
Accordingly, the number of NERA offices around the world expanded dramatically during the decade. The firm embarked on a concerted expansion in the Asia-Pacific region, opening offices in Tokyo (2001), Shanghai (2006), and Beijing (2008). In 2004, NERA founded its London-based Competition Policy Practice, which grew quickly and raised the stature of NERA in that field.
NERA also expanded its presence in Australasia, opening offices in Melbourne, Australia (2006), and in Auckland and Wellington, New Zealand (2008). The company also opened its first official office in Canada, expanding to Toronto in 2008. NERA’s European presence expanded as well, with office openings in Brussels (2000), Rome (2001), Paris (2003), Frankfurt (2004), and Geneva (2008). Within the US, NERA opened offices in Denver, Colorado and Austin, Texas. By the end of the decade, NERA experts were working from more than 20 offices around the world.
In 2006, Dr. Andrew Carron was named president of the firm, after presiding over the growth of the Securities and Finance Practice as Chair from 2003-2005.
As the decade closed, NERA was clearly a recognized leader in the areas of financial regulation and financial risk management, its experts affirmed as authorities in these areas.
2010 and Beyond
Even as we celebrate our first half-century we look ahead to the next one. New financial reforms on the horizon will almost certainly have a significant impact on the regulatory and legal environment for companies around the world, who continue to face myriad challenges in managing the risks and disputes that impact their businesses. Many disputes are becoming increasingly multi-national in their scope, and NERA will continue to expand its presence in markets that are active in international arbitration and litigation. The Securities and Finance Practice has an established and growing presence in Toronto, London, Tokyo, and Sydney, and will continue to monitor and cultivate new markets for advisory and dispute work in Europe, Asia, and elsewhere as developments warrant.
Meanwhile, the Transfer Pricing Practice continues to grow rapidly around the world. In the UK, the upcoming decennial electric market reform promises further opportunities for the Energy, Environment, and Network Industries Practice, as does ongoing work in the field of climate change policy and renewables.
As NERA celebrates its 50th anniversary and looks to the next 50 years, additional areas of potential growth include the formation of national policy in energy and environment, financial regulation in the US, and exploration of new geographies that are developing the kind of institutional structures that value the kind of work NERA does, such as India, Singapore, Hong Kong, Brazil, and South Africa.
Looking forward, history suggests that markets throughout the world will continue to evolve in the coming years and present companies, regulators, and other market participants with an array of new conflicts and complexities. And NERA will continue to evolve along with them, maintaining our focus on economics and providing the highest quality independent analysis and advice.