Finding of no Anticompetive Effect and validity of Noerr Pennington Defense in ASTM and API standards setting

No. 92-2212 GREATER ROCKFORD ENERGY AND TECHNOLOGY CORP., SHEPHERD OIL, INC., VIDALIA ETHANOL, LTD., et al., Plaintiffs-Appellants, v. SHELL OIL COMPANY, MARATHON PETROLEUM COMPANY, AMOCO OIL COMPANY, INC., CHEVRON, U.S.A., INC., ATLANTIC RICHFIELD CO., B.P. AMERICA, EXXON COM- PANY, U.S.A. and MOBIL OIL CORPORATION, Defendants-Appellees. Appeal from the United States District Court for the Central District of Illinois, Springfield Division. No. 90 C 3119--Richard Mills, Judge.



Plaintiffs have failed to show a sec. 1 violation because they have not presented evidence tending to show an agreement to restrain trade. Indeed, the conspiracy claim is belied by the fact that four of the eight defendants-- Amoco, Arco, Chevron and Mobil--sold alcohol-blended gasoline during the time of the alleged conspiracy to restrain trade in gasohol./8 The only evidence suggesting concerted action among the defendants is their common membership in organizations such as the American Society for Testing and Materials (ASTM), a private group which sets standards and specifications for, among other things, motor fuels. The defendants also belong to the American Petroleum Institute (API), a trade association representing all sectors of the domestic oil industry. The plain- tiffs allege that the defendants combined in these organizations to restrain trade (1) by delaying issue of an ASTM motor fuel specification that included gasohol and (2) by lobbying governmental authorities through the API to discourage the marketing and acceptance of gasohol. Neither of these claims, however, amounts to a sec. 1 violation. First, the failure of a private, standard-setting body to certify a product is not, by itself, a violation of sec. 1. In Consolidated Metal Products, Inc. v. American Petroleum Institute, 846 F.2d 284 (5th Cir. 1988), a manufacturer of "sucker rods"--a steel rod used to pump oil from wells-- argued that the API's delay in certifying its innovative product was an illegal restraint of trade in violation of sec. 1. The Fifth Circuit disagreed and affirmed summary judgment against the plaintiff. It held that "a trade association that evaluates products and issues opinions, with- out constraining others to follow its recommendations, does not per se violate section 1, when for whatever reason, it fails to evaluate a product favorably to the manufacturer." Id. at 292; see also Schachar v. American Academy of Ophthalmology, Inc., 870 F.2d 397, 399-400 (7th Cir. 1989). The Fifth Circuit then found that the delay in certification did not violate sec. 1 under a rule-of-reason analysis. First, the plaintiff failed to show a conspiracy, for "a trade association is not by its nature a 'walking conspiracy.' " Id. at 293-94; Wilk v. American Medical Ass'n, 895 F.2d 352, 374 (7th Cir.), cert. denied, 498 U.S. 982 (1990); see also Moore v. Boating Indus. Ass'n, 819 F.2d 693, 712 (7th Cir.), cert. denied, 484 U.S. 854 (1987) (membership in trade association alone not sufficient evidence of agreement to restrain trade). Second, there was no evidence of an intent to restrain trade, the court held, noting that the API followed its normal certification procedures. Finally, the court found no evidence of an anti- competitive effect because the certification, although influential, was not required to compete in the market. Reliance by oil pump buyers on the certification was voluntary, and the record indicated that the plaintiff had no problem selling its product without the API's certification. The plaintiffs' sec. 1 claim fails here for analogous reasons. As we have noted, there is no evidence of concerted ac- tion. In addition, the plaintiffs have not proffered evidence of an unlawful purpose. The ASTM did not stray from its normal procedures. Indeed, the plaintiffs concede as much, but argue that "the defendants did not even adopt an emergency specification for gasohol, although ASTM procedures plainly provided that emergency specifications could be adopted to fill a pressing need while a proposal went through the normal ASTM standards-writing process and ballots." Pls.' and Intervs.' Mem. in Opp'n to Defs.' Mots. for Summ. J. at 62. The failure to take emergency steps to specify gasohol and proceeding through the nor- mal specification process, however, is not evidence of an unlawful purpose. Finally, there is no evidence of an anti- competitive effect. The record indicates that in the period 1978-1987, during which the defendants, acting through the ASTM, allegedly restrained trade by not issuing a gasohol specification, ethanol fuel sales increased continuously from 20 million gallons per year to 825 million gallons per year--a 4000 percent increase. It would be difficult to show an anticompetitive effect on ethanol sales in the face of this increase. Moreover, the API's lobbying efforts do not support a sec. 1 claim. Under the Noerr-Pennington doctrine, lobby- ing that would arguably restrain trade is protected poitical activity and does not violate the antitrust laws. United Mine Workers v. Pennington, 381 U.S. 657 (1965); Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961). Although there is an exception from First Amendment protection for "sham lobbying," Noerr, 365 U.S. at 144, the Supreme Court has recently explained that "a sham situation involves a defendant whose activities are not genuinely aimed at procuring favorable governmental action at all, not one who genuine- ly seeks to achieve his governmental result but does so through improper means." City of Columbia v. Omni Out- door Advertising, Inc., 111 S. Ct. 1344, 1354 (1991) (citations and quotation marks omitted) (emphasis in original). Here, the plaintiffs do not allege that the lobbying efforts were not intended to get legislative results. In fact, the plaintiffs assert that the efforts achieved their desired legislative effect. Hence, these activities are protected and do not violate the Sherman Act.



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