Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
MARATHON PETROLEUM COMPANY LLC and Speedway SuperAmerica LLC,
Defendants-Appellees.
No. 07-3543.
tying agreement requiring franchisees to use franchisor's designated processing
service for credit card sales paid for with franchisor's proprietary credit card, and
claiming that franchisor conspired with banks to fix price of processing service.
The United States District Court for the Southern District of Indiana, Sarah Evans
Barker, J., 2007 WL 2900556, granted franchisor's motion to dismiss for failure to
(2) franchisor did not conspire with credit card issuers to fix price of processing
service.
Affirmed.
Key29Tk568 Tying Agreements
Key29Tk569 k. In General. Most Cited Cases
Key29T Antitrust and Trade Regulation
Key29TVI Antitrust Regulation in General
Key29TVI(D) Illegal Restraints or Other Misconduct
Key29Tk568 Tying Agreements
Key29Tk569 k. In General. Most Cited Cases
product from him as well, and the result will be a second monopoly, but only if the
tied product is used mainly with the tying product, and not if the tied product has
many other uses. Sherman Act, § 1, 15 U.S.C.A. § 1; Clayton Act, § 3, 15
U.S.C.A. § 14.
Key29Tk569 k. In General. Most Cited Cases
Tying agreements as a method of price discrimination do not violate the Sherman
Act unless the agreements have an exclusionary effect, and a monopolist does
not have to actually take over the market for the tied product in order to
Key29T Antitrust and Trade Regulation
Key29TVI Antitrust Regulation in General
Key29TVI(D) Illegal Restraints or Other Misconduct
Key29Tk568 Tying Agreements
Key29Tk571 k. Economic Power. Most Cited Cases
Key29T Antitrust and Trade Regulation
Key29TVI Antitrust Regulation in General
Key29TVI(E) Particular Industries or Businesses
Key29Tk597 k. Oil, Gas and Mining. Most Cited Cases
unilateral power over market price of gasoline so that franchisor could charge
supracompetitive price folded into price for gasoline charged to franchisees for
credit card processing, under tying agreement requiring franchisees to use
franchisor's designated processing service for credit card sales paid for with
franchisor's proprietary credit card. Sherman Act, § 1, 15 U.S.C.A. § 1.
Key382Tk1183 k. In General. Most Cited Cases
A trademark does not confer a monopoly; all it does is prevent a competitor from
attaching the same name to his product.
Franchisee petroleum dealers' allegations that franchisor oil company conspired
to receive kickbacks from credit card issuers in price-fixing scheme to overcharge
franchisees for credit card processing, under tying agreement requiring
franchisees to use franchisor's designated processing service for credit card
Headnote Citing References KeyCite Citing References for this Headnote
Key382T Trademarks
Key382TXI Trademarks and Trade Names Adjudicated
Key382Tk1800 k. Alphabetical Listing. Most Cited Cases
David M. Rodi (argued), Baker Botts, Houston, TX, for Marathon Ashland
Petroleum LLC.
T. Joseph Wendt, Barnes & Thornburg, Indianapolis, IN, for Speedway
SuperAmerica, LLC.
[1] Headnote Citing References The plaintiffs, a Marathon dealer in Indiana and a
company owned by him to whom he assigned his dealership contract, filed suit
against Marathon under section 1 of the Sherman Act, 15 U.S.C. § 1, charging it
with tying the processing of credit card sales to the Marathon franchise and also
with conspiring with banks to fix the price of the processing service. The tying
Custom Tops, Inc. v. Chrysler Motors Corp., 959 F.2d 468, 495-96 (3d Cir.1992)
(en banc); Smith Machinery Co. v. Hesston Corp., 878 F.2d 1290, 1298-99 (10th
Cir.1989).
The suit purports to be on behalf of all Marathon and Speedway dealers and so
motion to certify the suit as a class action was filed.
The complaint alleges that as a condition of granting a dealer franchise Marathon
requires the dealer to agree to process credit card “purchases of petroleum and
other products, services provided and merchandise sold at or from the [dealer's]
duplicate the processing equipment supplied by Marathon. We'll assume that this
would be so costly as to compel dealers to process all their credit card sales by
means of Marathon's designated system, since that system can process credit
card sales whether or not they are made with Marathon's credit card, thereby
enabling the dealer to handle all such sales with one set of equipment. So
(as in this case) by direction of the seller. The traditional antitrust concern with
such an agreement is that if the seller of the tying product is a monopolist, the tie-
in will force anyone who wants the monopolized product to buy the tied product
from him as well, and the result will be a second monopoly. This will happen,
however, only if the tied product is used mainly with the tying product; if it has
monopoly of that market and used it to jack up the price of ink, customers for its
machines would not be willing to pay as much for them because their cost of
using them would be higher. In economic terms, the machine and the ink used
with it are complementary products, and raising the price of a product reduces
the demand for its complements. (If the price of nails rises, the demand for
might be hard for him to do. Entering two markets having unrelated production
characteristics might both entail delay and increase the risk and hence cost of
the new entrant.
[3] Headnote Citing References Tying agreements can also be a method of price
from the low price of the machine. See Eastman Kodak Co. v. Image Technical
Services, Inc., 504 U.S. 451, 475-76, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992);
Mozart Co. v. Mercedes-Benz of North America, Inc., 833 F.2d 1342, 1345 n. 3
(9th Cir.1987); Hirsh v. Martindale-Hubbell, Inc., 674 F.2d 1343, 1348-49 (9th
Cir.1982). However, price discrimination does not violate the Sherman Act unless
agreements illegal provided only that, as the language of section 3 of the Clayton
Act seemed to require, the tying arrangement embraced a nontrivial amount of
interstate commerce. E.g., Northern Pacific Ry. v. United States, 356 U.S. 1, 5-7,
78 S.Ct. 514, 2 L.Ed.2d 545 (1958); International Salt Co. v. United States, 332
U.S. 392, 396, 68 S.Ct. 12, 92 L.Ed. 20 (1947). In the 1970s, however, the Court
2549, 53 L.Ed.2d 568 (1977) (territorial restrictions in distribution); cf. Illinois Tool
Works, Inc. v. Independent Ink, Inc., 547 U.S. 28, 126 S.Ct. 1281, 164 L.Ed.2d
26 (2006). The Court has not discarded the tying rule, and we have no authority
to do so. But it has *594 modified the rule by requiring proof that the seller has
“market power” in the market for the tying product. Illinois Tool Works, Inc. v.
109-10, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984); U.S. Healthcare, Inc. v.
Healthsource, Inc., 986 F.2d 589, 593 n. 2 (1st Cir.1993), Judge Boudin, in the
Healthcare case, described tying arrangements as “quasi” illegal per se. Id.
So “market power” is key, but its meaning requires elucidation. Monopoly power
seller who has a large market share may be able to charge a price persistently
above the competitive level despite the existence of competitors. Although the
price increase will reduce the seller's output (because quantity demanded falls as
price rises), his competitors, if they are small, may not be able to take up enough
of the slack by expanding their own output to bring price back down to the
As one moves from a market of one very large seller plus a fringe of small firms
to a market of several large firms, monopoly power wanes. Now if one firm tries
to charge a price above the competitive level, its competitors may have the
productive capacity to be able to replace its reduction in output with an increase
in their own output at no higher cost, and price will fall back to the competitive
[5] Headnote Citing References The plaintiffs in drafting their complaint were at
least dimly aware that they would have to plead and prove that Marathon had
significant unilateral power over the market price of gasoline and so could charge
a supracompetitive price (folded into the price for gasoline that it charges its
gasoline (improperly swollen by inclusion of Speedway's sales) are only 4.3
percent of total U.S. gasoline sales per year (computed from “Official Energy
Statistics from the United States Government,” www. eia. doe. gov/ basics/
quickoil. html, visited May 30, 2008). That is no one's idea of market power.
product markets.” Generac Corp. v. Caterpillar, Inc., 172 F.3d 971, 977 (7th
Cir.1999); see also Town Sound & Custom Tops, Inc. v. Chrysler Motors Corp.,
supra, 959 F.2d at 479-80; International Logistics Group, Ltd. v. Chrysler Corp.,
884 F.2d 904, 908 (6th Cir.1989); Grappone, Inc. v. Subaru of New England,
Inc., 858 F.2d 792, 796-97 (1st Cir.1988). The complaint does not allege that
the situation in which minor product differences (or the kind of locational
advantage that a local store, such as a barber shop, might enjoy in competing for
some customers) limit the substitutability of otherwise very similar products-will
want to trademark its brand in order to distinguish it from its competitors' brands.
But the exploitation of the slight monopoly power thereby enabled does not do
the existing level. The complaint does not allege that Marathon is colluding with
the other oil companies to raise the price of credit card processing. And under
the pleading regime created by Bell Atlantic Corp. v. Twombly, --- U.S. ----, 127
S.Ct. 1955, 1965-66, 167 L.Ed.2d 929 (2007), the plaintiffs' naked assertion of
Marathon's “appreciable economic power”-an empty phrase-cannot save the
but that assumption will not withstand scrutiny. All it has done is require its
franchisees to honor Marathon credit cards and to process sales with them
through the system designated by Marathon so that customers of Marathon who
use its card have the same purchasing experience no matter which Marathon
gas station they buy from. The combination of card and card processing enables
The plaintiffs do not challenge Marathon's right to offer this service. But once it is
in place the dealer has a powerful incentive to route all his credit card
transactions through the Marathon system, as otherwise he would have to
duplicate the processing equipment that Marathon supplies and lose the benefit
of being able to use his retail sales revenue to offset what he owes Marathon.
tires supplied by the car's manufacturer. Jack Walters & Sons Corp. v. Morton
Building, Inc., 737 F.2d 698, 704-06 (7th Cir.1984); see also United States v.
Microsoft Corp., supra, 253 F.3d at 87.
[7] Headnote Citing References The plaintiffs' other theory of antitrust liability is
the consumer in the form of a higher gasoline price, which reduces the demand
for gasoline and hence the use of credit cards. Why would issuers of credit cards
pay Marathon to reduce the demand for their product? If they are colluding
among themselves, they will simply charge the Marathon dealers a
supracompetitive price for processing credit card transactions. By doing this they
Affirmed.
Key29Tk568 Tying Agreements
Key29Tk569 k. In General. Most Cited Cases
Key29T Antitrust and Trade Regulation
Key29TVI Antitrust Regulation in General
Key29TVI(D) Illegal Restraints or Other Misconduct
Key29Tk568 Tying Agreements
Key29Tk569 k. In General. Most Cited Cases
product from him as well, and the result will be a second monopoly, but only if the
tied product is used mainly with the tying product, and not if the tied product has
many other uses. Sherman Act, § 1, 15 U.S.C.A. § 1; Clayton Act, § 3, 15
U.S.C.A. § 14.
Key29Tk569 k. In General. Most Cited Cases
Tying agreements as a method of price discrimination do not violate the Sherman
Act unless the agreements have an exclusionary effect, and a monopolist does
not have to actually take over the market for the tied product in order to
Key29T Antitrust and Trade Regulation
Key29TVI Antitrust Regulation in General
Key29TVI(D) Illegal Restraints or Other Misconduct
Key29Tk568 Tying Agreements
Key29Tk571 k. Economic Power. Most Cited Cases
Key29T Antitrust and Trade Regulation
Key29TVI Antitrust Regulation in General
Key29TVI(E) Particular Industries or Businesses
Key29Tk597 k. Oil, Gas and Mining. Most Cited Cases
unilateral power over market price of gasoline so that franchisor could charge
supracompetitive price folded into price for gasoline charged to franchisees for
credit card processing, under tying agreement requiring franchisees to use
franchisor's designated processing service for credit card sales paid for with
franchisor's proprietary credit card. Sherman Act, § 1, 15 U.S.C.A. § 1.
Key382Tk1183 k. In General. Most Cited Cases
A trademark does not confer a monopoly; all it does is prevent a competitor from
attaching the same name to his product.
Franchisee petroleum dealers' allegations that franchisor oil company conspired
to receive kickbacks from credit card issuers in price-fixing scheme to overcharge
franchisees for credit card processing, under tying agreement requiring
franchisees to use franchisor's designated processing service for credit card
Headnote Citing References KeyCite Citing References for this Headnote
Key382T Trademarks
Key382TXI Trademarks and Trade Names Adjudicated
Key382Tk1800 k. Alphabetical Listing. Most Cited Cases
David M. Rodi (argued), Baker Botts, Houston, TX, for Marathon Ashland
Petroleum LLC.
T. Joseph Wendt, Barnes & Thornburg, Indianapolis, IN, for Speedway
SuperAmerica, LLC.
[1] Headnote Citing References The plaintiffs, a Marathon dealer in Indiana and a
company owned by him to whom he assigned his dealership contract, filed suit
against Marathon under section 1 of the Sherman Act, 15 U.S.C. § 1, charging it
with tying the processing of credit card sales to the Marathon franchise and also
with conspiring with banks to fix the price of the processing service. The tying
Custom Tops, Inc. v. Chrysler Motors Corp., 959 F.2d 468, 495-96 (3d Cir.1992)
(en banc); Smith Machinery Co. v. Hesston Corp., 878 F.2d 1290, 1298-99 (10th
Cir.1989).
The suit purports to be on behalf of all Marathon and Speedway dealers and so
motion to certify the suit as a class action was filed.
The complaint alleges that as a condition of granting a dealer franchise Marathon
requires the dealer to agree to process credit card “purchases of petroleum and
other products, services provided and merchandise sold at or from the [dealer's]
duplicate the processing equipment supplied by Marathon. We'll assume that this
would be so costly as to compel dealers to process all their credit card sales by
means of Marathon's designated system, since that system can process credit
card sales whether or not they are made with Marathon's credit card, thereby
enabling the dealer to handle all such sales with one set of equipment. So
(as in this case) by direction of the seller. The traditional antitrust concern with
such an agreement is that if the seller of the tying product is a monopolist, the tie-
in will force anyone who wants the monopolized product to buy the tied product
from him as well, and the result will be a second monopoly. This will happen,
however, only if the tied product is used mainly with the tying product; if it has
monopoly of that market and used it to jack up the price of ink, customers for its
machines would not be willing to pay as much for them because their cost of
using them would be higher. In economic terms, the machine and the ink used
with it are complementary products, and raising the price of a product reduces
the demand for its complements. (If the price of nails rises, the demand for
might be hard for him to do. Entering two markets having unrelated production
characteristics might both entail delay and increase the risk and hence cost of
the new entrant.
[3] Headnote Citing References Tying agreements can also be a method of price
from the low price of the machine. See Eastman Kodak Co. v. Image Technical
Services, Inc., 504 U.S. 451, 475-76, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992);
Mozart Co. v. Mercedes-Benz of North America, Inc., 833 F.2d 1342, 1345 n. 3
(9th Cir.1987); Hirsh v. Martindale-Hubbell, Inc., 674 F.2d 1343, 1348-49 (9th
Cir.1982). However, price discrimination does not violate the Sherman Act unless
agreements illegal provided only that, as the language of section 3 of the Clayton
Act seemed to require, the tying arrangement embraced a nontrivial amount of
interstate commerce. E.g., Northern Pacific Ry. v. United States, 356 U.S. 1, 5-7,
78 S.Ct. 514, 2 L.Ed.2d 545 (1958); International Salt Co. v. United States, 332
U.S. 392, 396, 68 S.Ct. 12, 92 L.Ed. 20 (1947). In the 1970s, however, the Court
2549, 53 L.Ed.2d 568 (1977) (territorial restrictions in distribution); cf. Illinois Tool
Works, Inc. v. Independent Ink, Inc., 547 U.S. 28, 126 S.Ct. 1281, 164 L.Ed.2d
26 (2006). The Court has not discarded the tying rule, and we have no authority
to do so. But it has *594 modified the rule by requiring proof that the seller has
“market power” in the market for the tying product. Illinois Tool Works, Inc. v.
109-10, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984); U.S. Healthcare, Inc. v.
Healthsource, Inc., 986 F.2d 589, 593 n. 2 (1st Cir.1993), Judge Boudin, in the
Healthcare case, described tying arrangements as “quasi” illegal per se. Id.
So “market power” is key, but its meaning requires elucidation. Monopoly power
seller who has a large market share may be able to charge a price persistently
above the competitive level despite the existence of competitors. Although the
price increase will reduce the seller's output (because quantity demanded falls as
price rises), his competitors, if they are small, may not be able to take up enough
of the slack by expanding their own output to bring price back down to the
As one moves from a market of one very large seller plus a fringe of small firms
to a market of several large firms, monopoly power wanes. Now if one firm tries
to charge a price above the competitive level, its competitors may have the
productive capacity to be able to replace its reduction in output with an increase
in their own output at no higher cost, and price will fall back to the competitive
[5] Headnote Citing References The plaintiffs in drafting their complaint were at
least dimly aware that they would have to plead and prove that Marathon had
significant unilateral power over the market price of gasoline and so could charge
a supracompetitive price (folded into the price for gasoline that it charges its
gasoline (improperly swollen by inclusion of Speedway's sales) are only 4.3
percent of total U.S. gasoline sales per year (computed from “Official Energy
Statistics from the United States Government,” www. eia. doe. gov/ basics/
quickoil. html, visited May 30, 2008). That is no one's idea of market power.
product markets.” Generac Corp. v. Caterpillar, Inc., 172 F.3d 971, 977 (7th
Cir.1999); see also Town Sound & Custom Tops, Inc. v. Chrysler Motors Corp.,
supra, 959 F.2d at 479-80; International Logistics Group, Ltd. v. Chrysler Corp.,
884 F.2d 904, 908 (6th Cir.1989); Grappone, Inc. v. Subaru of New England,
Inc., 858 F.2d 792, 796-97 (1st Cir.1988). The complaint does not allege that
the situation in which minor product differences (or the kind of locational
advantage that a local store, such as a barber shop, might enjoy in competing for
some customers) limit the substitutability of otherwise very similar products-will
want to trademark its brand in order to distinguish it from its competitors' brands.
But the exploitation of the slight monopoly power thereby enabled does not do
the existing level. The complaint does not allege that Marathon is colluding with
the other oil companies to raise the price of credit card processing. And under
the pleading regime created by Bell Atlantic Corp. v. Twombly, --- U.S. ----, 127
S.Ct. 1955, 1965-66, 167 L.Ed.2d 929 (2007), the plaintiffs' naked assertion of
Marathon's “appreciable economic power”-an empty phrase-cannot save the
but that assumption will not withstand scrutiny. All it has done is require its
franchisees to honor Marathon credit cards and to process sales with them
through the system designated by Marathon so that customers of Marathon who
use its card have the same purchasing experience no matter which Marathon
gas station they buy from. The combination of card and card processing enables
The plaintiffs do not challenge Marathon's right to offer this service. But once it is
in place the dealer has a powerful incentive to route all his credit card
transactions through the Marathon system, as otherwise he would have to
duplicate the processing equipment that Marathon supplies and lose the benefit
of being able to use his retail sales revenue to offset what he owes Marathon.
tires supplied by the car's manufacturer. Jack Walters & Sons Corp. v. Morton
Building, Inc., 737 F.2d 698, 704-06 (7th Cir.1984); see also United States v.
Microsoft Corp., supra, 253 F.3d at 87.
[7] Headnote Citing References The plaintiffs' other theory of antitrust liability is
the consumer in the form of a higher gasoline price, which reduces the demand
for gasoline and hence the use of credit cards. Why would issuers of credit cards
pay Marathon to reduce the demand for their product? If they are colluding
among themselves, they will simply charge the Marathon dealers a
supracompetitive price for processing credit card transactions. By doing this they
Affirmed.
