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7th Circuit upholds antitrust suit dismissal

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The 7th Circuit Court of Appeals affirmed a decision by a U.S. District Court in Indiana which threw out a case involving Marathon Petroleum Company and its dealers because the dealers couldn't prove the company violated the Sherman Act.

The Circuit Court upheld the U.S. District Court, Southern Division of Indiana, Indianapolis Division's dismissal of John D. Sherman's complaint in John D. Sherman and S&D Holdings, Inc., on their own behalf and that of all others similarly situated v. Marathon Petroleum Company LLC and Speedway SuperAmerica LLC, No. 07-3543.

Sherman filed the suit against Marathon under Section 1 of the Sherman Act, charging the company with tying the processing of credit card sales to the Marathon franchise and also conspiring with banks to fix the price of processing these transactions.

Marathon dealers had to agree to process Marathon credit cards through a processing service designated by the company; the requirement only applies to Marathon's cards. Dealers are free to use other processing services for other credit cards, but would have to duplicate the system provided by Marathon. Marathon's processing system also can be used for other credit cards, so dealers aren't required to purchase other equipment.

Citing previous caselaw in their decision, the 7th Circuit found flaws in the plaintiffs' charge of illegal tying.

"The additional cost of using multiple card processing systems is not a penalty imposed by Marathon to force the use of its system, but an economy that flows directly from Marathon's offering its own credit card and credit card processing service," wrote Judge Richard Posner. "To call this tying would be like saying that a manufacturer of automobiles who sells tires with his cars is engaged in tying because, although the buyer is free to buy tires from someone else, he is unlikely to do so, having paid for the tires supplied by the car's manufacturer."

Sherman's kickback complaint makes no sense, wrote the judge, because if Marathon is forcing its dealers to pay a lot of money for processing credit card sales, this would only hurt firms that offer credit cards. Judge Posner reasoned that fee would be passed along to the customer in a higher gas price, which will reduce the demand for gas and the credit cards.

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