Rebel Oil Co. v. Atlantic Richfield Co.

51 F.3d 1421 (9th Cir. 1995)


Gasoline sold in Las Vegas is first produced from crude oil in Los Angeles refineries. Wholesale marketers then pump the gasoline to Las Vegas storage terminals via a common carrier pipeline operated by pipeline. Ninety-five percent of Las Vegas' gasoline travels this 250-mile route. Wholesale marketers sell the gasoline to retail marketers, who then sell the gasoline to Las Vegas motorists. As of 1991, there were more than 275 retail gasoline stations in Las Vegas. Some gasoline is sold only on a self-serve, cash-only basis. Ps are retail marketers of gasoline in Las Vegas who sell only self-serve, cash-only gasoline. D is a retail and wholesale marketer of gasoline in Las Vegas, as well as a major driller and refiner of crude oil in Los Angeles. D supplies gasoline to 53 retail stations in Las Vegas bearing the 'ARCO' brand name. These stations sell only self-serve, cash-only gasoline. Other major retail marketers of gasoline in Las Vegas are Southland Corp. and Texaco Inc. Because they sold only self-serve, cash-only gasoline, independent marketers enjoyed low overhead and, hence, could charge less than stations selling equivalent quality gasoline under major brand names. D adopted a nationwide strategy to compete directly with the independent discount marketers; it would sell only self-service. D's new strategy increased its sales and market share nationwide. Ps sued D alleging that D had engaged in predatory-pricing practices by selling below marginal cost from 1985 and 1989 in an attempt to take away market shares from its competitors and, eventually, monopolize the gasoline market in Las Vegas. Ps asserts that D's pricing scheme forced 37 competitors out of the Las Vegas gasoline market, including both independent discount marketers and major oil companies. Ps' own share of the self-serve, cash-only gasoline market dropped from 30 percent in 1982 to less than 10 percent in 1990. Ps claim that when the alleged predation ended in 1989, D had captured 54 percent of the market for self-serve, cash-only gasoline and that D then engaged in price gouging in order to recoup the losses that resulted from the predatory scheme. Ps contend that the relevant market is self-service gas stations, and D contends the market is full and self-service because full service can be converted to self-service with little or no effort. The court agreed with D. The court concluded that D's market share in the retail gasoline market in Las Vegas was insufficient as a matter of law to establish market power. It concluded that Ps failed to demonstrate that barriers to entry prevented other retailers from entering the retail gasoline market. The court dismissed the case, and Ps appealed.