Gas dealers attack lawsuit

Michelle Monroe

By Michelle Monroe

Executive Editor

Just
The Facts

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ST. ALBANS — Four large gas companies in northwestern Vermont are trying to convince a Chittenden County court to dismiss an anti-trust suit against them by arguing that although their prices rise and fall in lockstep they haven’t done anything illegal.

In June, a group of attorneys filed a class action suit against R.L. Vallee, S.B. Collins, Wesco, and Champlain Oil Company alleging the companies have worked together to keep gas prices in Franklin, Chittenden and Grand Isle counties artificially high in violation of the Vermont Consumer Protection Act.

The suit was filed by the lawyers on behalf of six residents living within the three counties.

The four companies have filed motions to dismiss the case, arguing the complaint contained insufficient evidence to proceed and that parallel pricing is both legal and a common feature of markets controlled by just a handful of companies, known as an oligopoly. Parallel pricing, they maintain, is not necessarily evidence of an illegal agreement to control prices.

Writing on behalf of S.B. Collins, attorneys Jeffrey Behm and Kevin Bumpkin wrote: “If a market is oligopolistic, as plaintiffs allege the three-county market is here, higher prices are expected there – not because of any agreement, but because of the natural characteristics of the market itself.”

Champlain Oil attorneys Robert Hemley and Matthew Byrne of Gravel and Shea add, “It is perfectly legal to look out the door to determine what price a competitor sells a product at and then match that price.”

In response, attorneys Joshua Simonds and Michael L. Murphy claim that the motions to dismiss are ignoring a key element of the alleged conspiracy—the four companies control over wholesale prices. It is that control, they write, which enabled them to determine the prices charged even by independent gas stations.

“It is not necessary for them to directly fix the gas prices at the retail level of the market because they collectively dominate the wholesale market,” Simonds and Murphy wrote. “Defendants’ control of the wholesale market allows them to dictate not only the price they charge for gas at their retail stations, but also the retail prices charged by independent gas stations.”

Although there are six wholesale gas suppliers in the three counties, the four named in the suit dominate the market, according to plaintiff attorneys.

In their complaint, plaintiffs allege the parallel pricing practices of the four defendants kept gas prices artificially high during periods when prices were dropping elsewhere. During those periods, each of the defendants could have lowered prices to try and increase their market share over that of their competitors, the plaintiffs argue.

Defendants respond that in an inelastic market – meaning sales don’t rise and fall much based on price — such a move would not be of any long-term benefit.

“In an inelastic market with a homogenous product, starting a price war for gasoline is not likely to add to lasting customer loyalty or a lasting increase in sales,” argue Hemley and Byrne. “There is no real long-term gain to destroying your profits to pick up a temporary gain in market share.”

In seeking a dismissal, the companies argue the complaint filed by plaintiffs is too vague and lacking in facts to be allowed to proceed, stating there is no evidence to support an illegal agreement among the four companies to control prices.

“The complaint does not contain a single allegation of a meeting, a conversation, or a communication in which named individuals agreed to fix gasoline prices,” in the words of R.L. Vallee attorneys Tristam Coffin, Walter Judge, and Merrit Schinipper.

“Plaintiffs cannot and do not allege when or where this purported conspiracy began, how it was maintained, the methods of communication supposedly used to carry it out or which individuals participated in it,” wrote the defense lawyers.

Dismissing the case at this stage – before any discovery has occurred – would prevent plaintiffs from finding any evidence that might exist of price collusion, plaintiffs replied.

Plaintiffs further argue they have provided enough evidence to be allowed to proceed with discovery under Vermont’s standards for filing a complaint.

The biggest piece of evidence favoring further investigation is the parallel pricing. While that pricing isn’t necessarily illegal, the Vermont Supreme Court has held it may be evidence of a conspiracy to control prices and as such would merit further investigation.

The defendants urge the court to consider the motion to dismiss in light of the U.S. Supreme Court ruling in Bell Atlantic Corp. v. Twombly. In that case, the Supreme Court found that parallel pricing, absent any other evidence of price collusion, was not sufficient grounds to sustain an anti-trust lawsuit.

Plaintiff attorneys argue Vermont has never adopted the Twombly standard, and that, indeed, the Vermont Supreme Court has on two occasions explicitly rejected it. Further, they maintain, the controlling law in this case is the standard set by the Vermont Supreme Court, not the federal courts. That standard explicitly holds that parallel pricing may be evidence of price collusion.

Both defendants and plaintiffs will be given an opportunity to file another round of responses to one another’s motions before any decision is issued.