Tuesday, May 12, 2009

Rebranding of Nearby Gas Station Did Not Cause Antitrust Injury

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

A Mobil gasoline station in Detroit failed to identify an antitrust injury resulting from an alleged conspiracy between ExxonMobil and Michigan Fuels, Inc.—one of the oil company’s approved distributors—to rebrand a nearby gas station, the U.S. Court of Appeals in Cincinnati has ruled.

Summary judgment in favor of ExxonMobil and the defending distributor (2008-1 Trade Cases ¶76,144) was affirmed.

The complaining gas station entered into a sales agreement with ExxonMobil to purchase the station and entered into a Petroleum Marketing Practices Act (PMPA) motor fuels dealer franchise agreement with McPherson Oil Company, another approved ExxonMobil distributor. About a year later, ExxonMobil approved the rebranding of a nearby gas station as an Exxon-branded station to be supplied under a PMPA agreement with Michigan Fuels.

The owner of the complaining gas station contended that Michigan Fuels’ principal—who was a distant relative—pursued the rebranding of the nearby station to get back at him for selecting McPherson Oil as his distributor. The complaining gas station argued that the rebranding violated an unwritten policy of avoiding locating ExxonMobil stations within one mile of each other.

Antitrust Injury

Any loss of business resulting from the rebranding of the nearby station represented an injury to an individual competitor, the court noted. It did not amount to an antitrust injury. The complaining gas station failed to establish an injury to the market as a whole resulting from the purported conspiracy. Further, an adverse market-wide effect was not shown to have resulted from a restriction on the complaining gas station’s ability to purchase gasoline from another source.

Michigan Antitrust Reform Act

A monopolization claim under the Michigan Antitrust Reform Act was also rejected. ExxonMobil would not have monopolized the stretch of road in Detroit served by the complaining gasoline station by requiring the complaining firm to buy a minimum quantity of branded gasoline from its distributor.

Relevant markets were generally not limited to a single manufacturer’s products, but were composed of products that were reasonably interchangeable—i.e., gasoline rather than ExxonMobil-branded gasoline. Further, the complaining gasoline station offered no evidence that ExxonMobil had the power to exclude competition from the market for gasoline, the court explained.

Michigan Franchise Law

ExxonMobil’s failure to provide the gas station owner with presale disclosures regarding an exclusive territory did not violate the Michigan Franchise Investment Law, since no franchise agreement existed between the two parties, the court explained. The owner’s franchise relationship was with McPherson Oil Co., which was not a party to the action.

Moreover, the relationship between the owner and McPherson Oil was not a “franchise” within the Michigan law because the owner was not required to pay a “franchise fee” for the right to enter into the business. Absent the required payment of a franchise fee, the Franchise Investment Law—and its disclosure requirement—did not apply, the court observed.

The May 4 not-for-publication decision in Partner & Partner, Inc. v. ExxonMobil Oil Corp. appears at 2009-1 Trade Cases ¶76,600.

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