Federal appeals court finds no conspiracy to inflate gas prices

A panel of judges sitting in the federal First Circuit Court of Appeals has upheld a lower court ruling that gasoline prices on Martha’s Vineyard have not been illegally inflated by a conspiracy among retailers, according to a report by “The Docket,” the news blog of Massachusetts Lawyers Weekly. The decision was entered a week ago.

Plaintiffs had complained that four of the Vineyard’s nine gas stations entered into a price-fixing conspiracy and engaged in price gouging in the aftermath of hurricanes Katrina and Rita in 2005.

Chief Judge Sandra Lynch, writing for Judges Bruce M. Selya and Jeffrey R. Howard, held that the defendant gasoline retailers did nothing that violated either the Sherman Antitrust Act or a price-gouging regulation promulgated under the Massachusetts consumer protection statute

The plaintiffs in the case are summer and year-round residents of Martha’s Vineyard and an Island real estate agency. The defendants operate four of the nine gas stations on Martha’s Vineyard. In Edgartown, individual defendant Francis Paciello owns the Edgartown Mobil station. The defendant corporation Depot Corner Inc., which is wholly owned by Mr. Paciello, owns the Depot Corner station, also in Edgartown. In Vineyard Haven, defendant corporation Drake/Kenyon owns the XtraMart Citgo station in Vineyard Haven and also supplies gasoline to the Edgartown stations at wholesale. Defendant corporation R.M. Packer, also in Vineyard Haven, owns the Tisbury Shell gas station; R.M. Packer is owned by the individuals Ralph Packer and his wife. Of the other five gas stations on the Island, two are in Oak Bluffs, one is in Edgartown, and two are in West Tisbury and Chilmark.

The appeal was taken from a decision by U.S. District Court Judge Rya W. Zobel, who also found for the defendant retailers. The district court decision was discussed in an earlier Martha’s Vineyard Times news report.

“The district court reasoned that most of the evidence the plaintiffs proffered was no more consistent with conspiracy than with independent choices to engage in parallel pricing. The district court found other evidence not sufficiently probative of conspiracy,” Judge Lynch wrote.

Sustaining the plaintiff’s allegations, the judge wrote, required evidence of overt acts and communication among the retailers leading to their acting in concert to raise prices. The appeals court judge described the Vineyard retail market for gasoline as “oligopolistic” and “highly conducive to parallel pricing,” which does not satisfy the law’s standard.

And with regard to price gouging, alleged under the provisions of Massachusetts law, “Plaintiffs have not shown a ‘gross disparity in prices’ under the state price-gouging rule, even taking into account defendants’ gross margins during the period of price increases,” Judge Lynch wrote.

“The only question before us,” she added, “is whether the supracompetitive prices charged by defendants on Martha’s Vineyard are a result of illegal actions in violation of federal antitrust laws or state anti-price-gouging rules. Plaintiffs have failed to meet the legal standards for proof of those violations.”