The California gasoline conspiracy: conscious parallelism and plus factors

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Case name and reference

Persian Gulf Inc v BP West Coast Products LLC, et al (3:2015cv01749)

Richard Bartlett, et al v BP West Coast Products LLC, et al (3:2018cv01374)
CourtUS District Court for the Southern District of California

Alon USA Energy

BP West Coast Products

Chevron USA

David Rinaldi

Equilon Enterprises

Exxon Mobil Corporation and ExxonMobil Refining & Supply Co

Joshua Ebright

Paul Lee

Persian Gulf

Phillips 66

Tesoro Refining & Marketing Company

Valero Marketing and Supply Company
Cause of action

Section 1 of the Sherman Act

The Cartwright Act

Section 16700 of the California Business and Professions Code

Section 17200 of the California Business and Professions Code

As per the Federal Rules of Civil Procedure 56, on summary judgement in an antitrust conspiracy case, a party can move to show that there is no genuine dispute of material fact on any essential element of a price-fixing claim. These essential elements are:

  • conspiracy to fix prices in violation of antitrust law;
  • injury resulting from that violation; and
  • damages (Persian Gulf, Inc v BP West Coast Products, LLC, et al and Richard Bartlett, et al v BP West Coast Products LLC, et al, Lead Case No 18-cv-1374-JO-AGS (consolidated with No 18-cv-1377-JO-AGS), Order Granting Defendants’ Motions for Summary Judgement, 30 September 2022 at pp 10 and 11).

On the first element, conspiracy can be established by either direct or inferential evidence from which one could infer that the defendants had entered an illegal agreement. Direct evidence is “explicit and requires no inferences to establish the proposition or conclusion being asserted”. In contrast, inferential evidence requires one or more inferential steps to reach a conclusion of conspiracy.

In Persian Gulf, the plaintiffs did not advance any direct evidence of a conspiracy among defendants. As the court noted:

Plaintiffs do not purport to submit evidence of conversation, emails or other documents that would directly establish that defendants entered into an agreement with one another. Instead, their briefing focuses on inferential evidence of parallel conduct and plus factors to establish a genuine dispute as to conspiracy.

When a plaintiff’s conspiracy allegations are based solely on inferential evidence, as they were here, the Ninth Circuit has a two-step framework to assess whether the evidence supports the inference that the defendants conspired to fix prices (referencing In Re Citric Acid Litig, 191 F3d 1090, 1094 (9th Cir 1995) and Richards v Neilsen Freight Lines, 810 F2d 898, 902 (9th Cir 1987)). In the first step: "The defendant[s] can ‘rebut an allegation of conspiracy by showing a plausible and justifiable reason for its conduct that is consistent with proper business practice’”. Defendants may satisfy this burden by showing that the allegedly conspiratorial conduct "was in each defendant's independent self-interest".

The burden then shifts back to the plaintiffs to provide evidence demonstrating that the defendant was not engaging in lawful competitive behaviour to avoid summary judgement (referencing Barnes v Arden Mayfair, Inc, 759 F2d 676, 680 (9th Cir 1985)). Plaintiffs can meet this burden by offering proof of parallel conduct among alleged conspirators and plus factors, which are defined as additional inferential evidence – economic actions and outcomes – that, when combined with parallel-conduct evidence, are more consistent with conspiracy than with unilateral decision (referencing In Re Musical Instruments & Equip Antitrust Litig, 798 F3d 1186, 1193-94 (9th Cir 2015)). Plus factors may include evidence demonstrating "a common motive to conspire, evidence that shows that the parallel acts were against the apparent individual economic self-interest of the alleged conspirators and evidence of a high level of inter-firm communications" (referencing Ross v Citigroup, Inc, 630 F App'x 79, 82 (2d Cir 2015)).

Conscious parallel conduct by competitors who adopt similar business practices concurrently is neither unlawful nor uncommon (referencing In Re Musical Instruments & Equip Antitrust Litig, 798 F3d at 1193; Stanislaus Food Prods Co v USS-POSCO Indus, 803 F3d 1084, 1092 (9th Cir 2015); Brooke Grp Ltd v Brown & Williamson Tobacco Corp, 509 US 209, 227 (1993); and Theatre Enters, Inc v Paramount Film Distrib Corp, 346 US 537, 540-41 (1954)). In interdependent markets with relatively few firms accounting for the majority of production, parallel conduct is common among players who "recogniz[e] their shared economic interests and their interdependence with respect to price and output decisions" (referencing Bell Atlantic Corp v Twombly, 550 US 544, 553-54 (2007) and Brooke Grp, 509 US at 227)). As the Supreme Court recognised in Twombly, the “common reaction” of firms that each pursue their own “shared economic interests” is “not in itself unlawful”. Thus, while parallel conduct is a relevant factor, it alone is insufficient to support an inference of conspiracy and must be paired with additional plus factors to determine whether the facts give rise to a reasonable inference of conspiracy.

See here for parts one and two of this analysis.

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