Tuesday, December 31, 2013

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

Omega Environmental, Inc. v. Gilbarco, Inc. case brief summary 
(9th Cir. 1997)

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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