Legal Definitions - yardstick theory

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.