Court Dismissal Of The D.C.

Action Against ExxonMobil And Gasoline

Distributors Further Action Is eeded to Address Allegations of !rice"Inflating
Anticom#etiti$e Conduct
By: Don Resnikoff and Tracy Rezvani* 6-1-2014
The D.C. Attorney General has alleged that high local D.C. gasoline prices are caused
y antico!petiti"e e#clusi"e dealing restrictions i!posed on retailers y do!inant
distriutors. The allegations should not no$ e ignored si!ply ecause a trial-le"el
court has decided that the legal co!plaint rought y the Attorney General against
%##on&oil and local distriutors under a special local statute $as not authori'ed under
that statute. The D.C. Council could easily (i# the statute to pro"ide the needed
authority. Alternati"ely) the Attorney General could) depending on the outco!e o( a
possile appeal o( the trial court decision) si!ply (ile a ne$ antitrust action. *ri"ate
plainti((s could also sue) ut that re+uires plainti((s $ith a Da"id ". Goliath ,ind o(
courage) and sustantial (inancial resources. -hat $ould e un(ortunate (or District
residents is to lea"e unresol"ed the +uestion o( $hether antico!petiti"e conduct y
distriutors $ho do!inate the !ar,et is pushing gasoline prices up in DC and needs to
e stopped. -hether there is such antico!petiti"e conduct is a +uestion o( (act that
should e resol"ed y a court) not y editorial opinions li,e those pulished y the
-ashington *ost.
.n recent years) the District o( Colu!ia has had a reputation (or high retail gasoline
prices. %#perts li,e /ohn To$nsend o( the AAA and antitrust e#pert Da"id Balto ha"e
pulicly pointed out that a duopoly o( local gasoline distriutors has used e#clusi"e
dealing contracts $ith gasoline retailers that ,eep prices arti(icially high. To$nsend has
said o( the larger distriutor in the duopoly that 01e is o"ercharging gas station o$ners.2
The reason that do!inant distriutors can success(ully use e#clusi"e dealing
re+uire!ents to ,eep prices high is that the e#clusi"ity re+uire!ent loc,s in the retailer
and pre"ents the retailer (ro! shopping (or a lo$er $holesale price. 3etailers (orced to
pay high $holesale prices ha"e little choice ut to pass on the high price to consu!ers.
.( consu!ers in particular neighorhoods ha"e li!ited aility to a"oid the loc,ed-in
retailers) then those consu!ers are li,ely to share the e#perience o( high prices eing
passed on to the!.
The legal co!plaint (iled y the District o( Colu!ia4s Attorney General .r"ing 5athan in
the DC 6uperior Court against %##on&oil and local gasoline distriutors 7o(ten called
08oers29 $ould ha"e loc,ed these antico!petiti"e e#clusi"e dealing contracts y
distriutors) and so !ight ha"e reduced gasoline prices in the District o( Colu!ia. The
Attorney General4s action charged "iolation o( a local statute $ith li!ited proo(
re+uire!ents) the 3etail 6er"ice 6tation Act) D.C. Code :: ;6-;01.01 et seq. 7the
0366A29) $hich prohiits distriutors (ro! en(orcing e#clusi"e dealing contracts $ith
gasoline retailers. The action $as dis!issed y 6uperior Court /udge Craig .scoe on
&ay 6) 2014. <ou can see the opinion at http:==$$$.scrid.co!=doc=222>2?6;>.=DC-
%##on-@-6-2014-Arder-Granting-&TDs-1.
The AG action $as not dis!issed on the !erits. .nstead) the Court ruled that the
Attorney General lac,ed standing under the rele"ant 6uchapter o( the 366A: 0Bntil
such ti!e as the CDCD Council changes its position) the Court (inds that the Attorney
General has no standing to ring actions under that 6uchapter o( ... o( the 366A) !ore
speci(ically) D.C. Code : ;6-;0;.017a9769 and 7a97119.E The court4s conclusion is that
$hile the 366A "ests authority in the &ayor 7and y e#tension the Attorney General9 to
ring actions under certain 6uchapters o( the 366A) the authority does not include AG
actions under 6uchapter ...) the 6uchapter on $hich the Attorney GeneralFs
Co!plaint is ased. .nstead) the court concluded) suchapter ... per!its only actions y
particular a((ected dealers.
.( there $ere any dout aout the point that the court4s decision did not rule against the
Attorney General on the !erits) /udge .scoe4s opinion includes a (ootnote telling
%##on&oil that it could indeed e held liale under the 366A (or the alleged conduct.
There is good reason to elie"e that i( the court reached the antitrust !erits) the District
$ould pre"ail) and certainly enough reason to so elie"e (or a trial on the !erits to e
appropriate. -hile the AG action relied on a relati"ely narro$ local statute) $ith li!ited
proo( re+uire!ents) that prohiits e#clusi"e dealing) the igger point G an antitrust point
G is that there is good reason to elie"e that a trial on the !erits $ould lead to the
conclusion that %##on&oil and the de(endant 8oers ha"e used their !ar,et po$er
and e#clusi"e dealing re+uire!ents in $ays that ha"e caused arti(icially ele"ated pricing
o( gasoline (or gasoline retailers and consu!ers. -hether that is so is) o( course) a
!atter o( (act) not o( editorial opinion.
The pulic interest $ould e ser"ed y a trial o( the (acts alleged y the Attorney
General. That $ould ser"e the interests o( the consu!ing pulic as $ell as gasoline
retailers. The DC Council should "est authority in the &ayor and AG to ring an action
under the rele"ant 6uchapter .... Council !e!er &ary Cheh4s o((ice reports that she
is introducing e!ergency legislation) titled the 03etail 6er"ice 6tation %!ergency
A!end!ent Act o( 2014.2 that $ill pro"ide that authority. Alternati"ely) the Attorney
General should) i( the lo$er court decision is not re"ersed on appeal) consider (urther
court action under D.C.Code : 2?-4@02) the District4s antitrust statute 7$hich is
sustanti"ely identical to the (ederal 6her!an Act9.
The D.C. Attorney General4s pulic state!ents and "arious court (ilings report in so!e
detail the (acts that support an antitrust en(orce!ent action) so!e o( $hich are in the
co!plaint in the dis!issed action) and so!e o( $hich are not. D.C. Attorney General
.r" 5athan e#plained the local gasoline !ar,et4s dys(unction in a letter pulished y the
-ashington *ost on 6epte!er 6) 201;. 1is letter 7$hich is a"ailale at
http:==$$$.$ashingtonpost.co!=opinions=e#clusi"e-supply-agree!ents-(or-(uel-dri"e-
prices-in-the-district=201;=0H=06=>(164ce2-1@H1-11e;-H61c-(22d;aa(1HaIstory.ht!l9 re
utted a -ashington *ost editorial critici'ing the Attorney GeneralFs suit against
%##on&oil and local distriutors. 7The *ost recently reiterated its criticis!) at
http:==$$$.$ashingtonpost.co!=opinions=the-districts-crusade-against-gas-station-
!agnat e-8oe-!a!o-is-running-on-(u!es=2014=0@=2;=H62(66a-e2H>-11e;-?10(-
>64(e@0??2dIstory.ht!l.9
The (acts outlined in the AGFs letter are straight(or$ard. Jertical e#clusi"e dealing
restraints against gasoline retailers are i!posed y do!inant $holesalers in the District
o( Colu!ia and are har!(ul ecause they raise $holesale and retail gasoline prices:
EJertically i!posed supply restrictions) $hile perhaps FenignF in a truly co!petiti"e
!ar,et) ha"e great potential to har! co!petition and raise consu!er prices in one
do!inated y a single large supplier. The unusually high prices at !any D.C. pu!ps
should surprise no one. The District4s la$suit challenging e#clusi"e supply agree!ents
is rought against a single) large gasoline $holesaler that supplies aout 60 percent o(
the city4s stations) including al!ost all o( the %##on) 6hell and Jalero rand stations.E
&r. 5athan4s points sound in antitrust: e#clusi"e dealing conduct y dominant
distriutors) supported y !a8or oil co!panies) raises prices to station o$ners and
consu!ers. The issues o( antico!petiti"e conduct raising local gasoline prices should
not e ignored) and the Attorney General4s sta(( should e per!itted to present rele"ant
proo(s so a (actual (inding can e !ade in a court o( la$. 6o!e !ay ha"e the opinion
that a 8udicial proceeding per!itting proo(s o( antico!petiti"e conduct y the Attorney
General in Court is undesirale) ut such an opinion $ould !a,e sense only i( there
$ere strong reason to elie"e that the Attorney General4s allegations are un(ounded.
But the contrary is the case G there is good reason to elie"e the Attorney General4s
allegations are correct.
K Don 3esni,o(( is a la$yer $ho has had DC gasoline retailers as clients. Tracy 3e'"ani
is a 6hareholder at 3e'"ani Jolin L 3otert *.C. The "ie$s she is e#presses are her
o$n) and are not o((ered on ehal( o( her (ir!.