Antitrust Lawyer Blog Commentary on Current Developments

D.C. Government Continues Fight Over Alleged Gas Price Fixing in the District of Columbia

On May 6, 2014, a gasoline price-fixing lawsuit brought by District of Columbia Attorney General Irving Nathan was thrown out of court by Judge Craig Iscoe, ruling the District of Columbia has no grounds to bring such an action.

The District of Columbia’s lawsuit challenged the exclusive dealing contracts (the so-called “jobbers”) that gas stations had with specific suppliers that are the norm in the District.  As much as 60% of the gas stations in Washington, D.C. have the same supplier.

The District of Columbia argued that these exclusive supply arrangements violated the Retail Service Station Act, D.C.  Code §§ 36-301.01 et seq. (the “RSSA”), which prohibits distributors from enforcing exclusive dealing contracts with gasoline retailers.  However, Judge Iscoe dismissed the case because he found that the Attorney General’s office did not have the power to sue on this matter. Judge Iscoe found that only those who are directly affected by the alleged cartel have the right to sue.

Following this decision, D.C.-Councilor for Ward 3, Mary Cheh, announced a proposal to grant emergency powers to the city to enable it to sue again. Alternatively, the District of Columbia can renew litigation under D.C. Code § 28-4502, the District’s antitrust statute (which is substantively identical to the Sherman Act).

Regardless of the status or the outcome of the litigation, the fact remains that the average gas prices in Washington, D.C. is consistently around twenty cents higher than in Virginia or Maryland.  While many competing theories attempt to explain this phenomenon, including generally higher gas prices in urban areas and high income of many D.C. residents, the court may yet find the explanation offered by Mr. Nathan the most compelling—i.e., that high pump prices in D.C. is the direct and proximate cause of the vertically integrated supply arrangement between gas stations and their suppliers, especially given that the largest supplier, Capital Petroleum Group, also owns a substantial number of gas stations within the District of Columbia.  In fact, should the District of Columbia choose to go forward using antitrust laws, the D.C. government  may find the high market concentration and vertical integration in the Washington, D.C. gas market conducive for its arguments.

 

Mark Ye
202-589-1834
mye@dbmlawgroup.com