Friday, January 17, 2014

Omega Environmental, Inc. v. Gilbarco, Inc. case brief summary

Omega Environmental, Inc. v. Gilbarco, Inc. case brief summary
Court opinions for Omega Environmental, Inc. v. Gilbarco, Inc.
Omega Environmental, Inc. v. Gilbarco, Inc., 127 F. 3d … - ‎Court of Appeals, 9th Circuit

Gilbarco is a manufacturer of petroleum dispensing equipment used in gas stations and only 5 such manufacturers compete in the US (Gilbarco has 55% in the market, next two have 18%). Distributors sell about 2/3s of Gilbarco's equipment and the rest are sold wholesale to large retail chains. The distributors all have exclusive dealing relationships with the 5 manufacturers. Omega wants to set up a one-stop shop for equipment and buys some authorized Gilbarco distributors; Gilbarco immediately ceases supplying equipment based upon violation of the exclusive dealing arrangement.


Notable Facts
  • Lots of competition between the manufacturers (for distributors and sales), prices went down, not up, recently, and exclusive dealing contracts were limited to durations of 1 year and generally cancellable by either side with 60-day notice.
  • Although Omega alleges that these have the effect of chilling entry to another manufacturer, Gilbarco shows that Schlumberger successfully entered and expanded.
  • Although the Court acknowledges a theoretical 38% foreclosure, it rules that foreclosure from distributors is not identical to foreclosure from the market and that this foreclosure level is much lower than it appears.

  • Omega’s evidence that exclusive dealing arrangements (not merely Gilbarco’s) actually occupied the entire field were apparently disregarded.
  • Despite the incipiency language in Clayton § 3, the majority disagrees with the potential danger inflicted upon the industry.

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